Gold prices fell by about 0.3%, partially offsetting yesterday's rally (+0.98%), which was caused by the higher value of the US currency. Meanwhile, experts said that the tailwinds partly with respect to geopolitical risk and potential stresses in the banking system limited the further fall in gold prices.
The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) rose by 0.11% to 105.15.
Market participants are also preparing for the speech of Fed policymakers, hoping to get new clues about the pace and extent of monetary policy easing. Yesterday Fed Bank of New York President John Williams said that at some undefined point the U.S. central bank will lower its interest rate target. He did not offer a time table for action but said the economy was overall moving back into better balance. Markets are now pricing in 50 basis points of cuts this year, with a rate cut in November fully priced in. According to the CME FedWatch Tool, markets see a 8.7% probability of a 25 basis point rate cut at the Fed meeting in June, a 31.4% probability of a rate cut in July, and a 67.1% probability of monetary policy easing in September. Lower interest rates reduce the opportunity cost of holding non-yielding bullion.
Also in focus were Chinese data, which indicated that the central bank continued to add to its gold reserves in April (for the 18th month in a row). According to the report, China held 72.80 million fine troy ounces of gold (+0.06 million ounces compared to March). Meanwhile, the value of gold reserves increased by $6.89 billion to $167.96 billion.