The price of gold jumped by about 0.7% after falling by 1.56% yesterday amid profit-taking by investors and updated Fed forecasts on interest rates.
Following its June meeting, the Fed kept rates at the same level and predicted only one rate cut in 2024, despite some progress in inflation. Higher rates increase the opportunity cost of holding non-yielding bullion. Despite the Fed's projections, markets stuck with pricing in two 0,25% rate cuts this year. According to the CME FedWatch Tool, markets see a 12.4% probability of a 25 basis point rate cut at the Fed meeting in July, a 65.0% probability of a rate cut in September, and a 78.7% probability of monetary policy easing in November.
Meanwhile, the positive dynamics of the US currency limited the growth of prices for precious metals. 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) rose by 0.32% to 105.53, reaching its highest level since May 9.
Today, investors will focus on import price data for May, as well as the Reuters/Michigan consumer sentiment index for June. Economists predict that the import price index has not changed compared to April, and the consumer sentiment index rose to 72.0 from 69.1 in May. Statistics on consumer inflation expectations will also be important: in May, according to Reuters/Michigan data, the five-year inflation outlook stood at a five-month high of 3%, while the year-ahead inflation expectations rose to a 6-month high of 3.3% from 3.2% in April.