The price of gold fell by about 1.9%, hitting a more than 2-week low, which was caused by investors adjusting positions ahead of the publication of US data on GDP and inflation.
The markets are awaiting GDP data, due at 12:30 GMT, and personal consumption expenditure (PCE) data on Friday to calibrate their expectations of the timing of rate cuts. Consumer spending has declined in recent months. Nominal personal expenses increased by 0.1% in April and 0.2% in May, which is lower than the average monthly pace in the first quarter. Adjusted for inflation, spending has declined sharply in two of the last five months, suggesting that high financing costs are beginning to affect consumer behavior. Demand has decreased markedly for leisure and durable goods that are sensitive to interest rates. Incomes are still growing at a steady pace, increasing by 0.5% in May. However, slowing wage growth is the next headwind facing consumers as the labor market returns to pre-pandemic levels. June data is expected to show a slight rebound 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 0.1% m/m after a similar increase 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 100% probability of a rate cut in September, and a 100% probability of monetary policy easing in November. Lower interest rates reduce the opportunity cost of holding non-yielding bullion.
Meanwhile, the World Gold Council said that continued election-related uncertainty and growing geopolitical threats will increase volatility and likely increase investor demand for safe haven assets such as gold.