The price of gold fell by about 0.2%, partially offsetting yesterday's increase (+0.56%), as market participants adjust their positions ahead of the publication of US inflation data, which may affect the timing of the Fed's interest rate cut.
First-quarter U.S. GDP estimates are due on Thursday and the personal consumption expenditures (PCE) price index report on Friday. Based on the weak May consumer price index and producer price index, PCE is expected to have grown by only 0.1% in May, which corresponds to an annual rate of 2.6%. If implemented, it would be another step in the right direction in terms of fighting inflation, but the Fed will eventually need to see a little more progress before it starts easing policy. But if the growth of core PCE exceeds the forecasts of experts, this could potentially lead to a drop in gold below $2300. According to the CME FedWatch Tool, markets see a 10.3% probability of a 25 basis point rate cut at the Fed meeting in July, a 67.7% probability of a rate cut in September, and a 79.8% probability of monetary policy easing in November. Lower rates reduce the opportunity cost of holding non-yielding bullion.
In addition to the data, investors will also be focusing on speeches from Fed policymakers, including Fed Governors Lisa Cook and Michelle Bowman along with Richmond Fed President Tom Barkin.