Gold rose about 0.5% on Monday after falling 1.6% on Friday. Prices are supported by the negative dynamics of the US currency, falling yields on US Treasury bonds, as well as geopolitical tensions in the Middle East. At the same time, investors are preparing for the publication of the US inflation data.
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 0.14% to 105.64.
As for the data, the key event of this week will be the publication of the U.S. personal consumption expenditures (PCE) price index (on Friday). There are some signs that U.S. consumption is starting to weaken. The latest of these was weak retail sales data for May, which led to a downward revision of data for previous months. But experts expect that in May, real personal expenses increased by 0.3%. Thus, the weakness in retail trade was partly due to lower prices, while the sales figure in the control group, which is a reliable indicator of broader consumer spending, grew at a decent pace. Income growth has once again become the main source of household purchasing power, as the period of additional liquidity and cheap loans has been left behind. Strong hiring and wage growth in May promises solid income gains — personal income is projected to have increased by 0.4% last month, which will help support spending. Thus, the personal savings rate is likely to remain around 3.6% for another month. Meanwhile, 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. 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 65.9% probability of a rate cut in September, and a 78.2% probability of monetary policy easing in November.