The price of gold increased by about 0.2%, which was facilitated by the weakening of the US currency. Market participants are also preparing for the publication of new US statistical data that will help clarify the trajectory of the Fed's monetary policy.
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 0.15% to 104.25 in response to U.S. President Joe Biden's decision to end his reelection campaign. A weaker dollar makes bullion more attractive to buyers holding other currencies.
Last week, gold prices reached a historic high amid increased expectations of easing of the Fed's monetary policy and political uncertainty in the United States. This week, investors will focus on the PMI indices for July, GDP data for the 2nd quarter, as well as the June report on personal income and spending. U.S. GDP grew by 1.4% QoQ in the first quarter, the slowest pace since the economy contracted in the first half of 2022. According to forecasts, GDP growth accelerated to 2% QoQ in the 2nd quarter. Meanwhile, economists expect the data for May to indicate a slight jump in consumer spending and a slight slowdown in income growth. Consensus estimates suggest that personal income rose by 0.4% after an increase of 0.5% in May, and personal expenses increased by 0.3% after an increase of 0.2%. Economists also forecast that the core PCE price index, the Fed's preferred inflation indicator, rose 0.2% m/m after an increase of 0.1% in May. If the growth of this indicator exceeds forecasts, the probability of easing the Fed's monetary policy in September is likely to decrease. According to the CME FedWatch Tool, markets see a 4.7% probability of a 25 basis point rate cut at the Fed meeting in July, a 96.2% probability of a rate cut in September, and a 98.8% probability of monetary policy easing in November. Lower interest rates reduce the opportunity cost of holding non-yielding bullion.