The price of gold fell by about 0.3% after it jumped by 0.58% yesterday amid the weakening of the US currency and the activation of buyers ahead of the publication of US data. At the same time, trading activity was reduced due to the official weekend in the United States.
Today, 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 0.10% to 104.50, which is a positive factor for gold.
Gradually, the focus of investors' attention is shifting to US inflation data (to be released on Friday), which will provide new clues about the timing of the Fed's monetary policy easing. Last week, the minutes of the Fed's May meeting showed that it will probably take longer than previously estimated for inflation to fall to the target level (2%). The publication of the core personal consumption expenditure price index, which is the Federal Reserve's preferred measure of inflation, will help assess progress in the fight against inflation. Economists expect that this indicator rose by 0.3% m/m in April after a similar increase in March. If the data exceeds forecasts, it will further reduce the likelihood of a Fed policy easing this year. According to the CME FedWatch Tool, markets see a 10.2% probability of a 25 basis point rate cut at the Fed meeting in July, a 49.4% probability of a rate cut in September, and a 61.7% probability of monetary policy easing in November. Bullion is known as an inflation hedge, but higher rates increase the opportunity cost of holding non-yielding gold.
Meanwhile, today the publication of the US consumer confidence index for May may influence gold. The gap between consumer spending and confidence has become a widely tracked phenomenon in the past year. Household confidence, according to Conference Board estimates, fell for three months in a row and in April reached its lowest level since the summer of 2022. Meanwhile, real consumer spending increased by 2.5% in the first three months of this year. Why is the level of trust low when costs are stable? The steady rise in prices explains at least part of this gap. Inflation has decreased from its breakneck pace in 2022, but prices continue to rise, and the price shock of the last few years has exacerbated the disappointing economic outlook. In April, gasoline prices rose, retail sales stagnated, stock prices fell, and the unemployment rate rose 0.1%. Although stock prices have risen recently, this probably won't have a significant impact on household sentiment. According to forecasts, the consumer confidence index fell to 95.9 in May from 97.0 in April.