The price of gold rose by about 0.25% on Friday after it fell by 2.33% yesterday and reached its lowest level since May 9 amid lower expectations of easing the Fed's monetary policy. The price recovery was caused by partial profit-taking and the negative dynamics of the US currency.
Market participants revised their forecasts regarding the timing of Fed rate cuts after the publication of the minutes of the May Fed meeting and PMI data, which indicated that the growth of business activity in the US private sector accelerated to the highest level since April 2022, while manufacturers reported surging input prices. According to the CME FedWatch Tool, markets see a 0% probability of a 25 basis point rate cut at the Fed meeting in June, a 14.3% probability of a rate cut in July, and a 53.2% probability of monetary policy easing in September. Bullion is known as an inflation hedge but higher rates increase the opportunity cost of holding non-yielding gold.
Meanwhile, 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) fell by 0.14% to 104.96.
Experts said that despite the slowdown in gold purchases, the People’s Bank of China remains the main source of demand and this may limit the losses of the precious metal at the moment.