The price of gold rose by 0.15% after falling by 1.28% yesterday amid partial profit-taking after the recent rally. The precious metal is supported by a slight weakening of the US currency. Investors are also preparing for a speech by Fed Chairman Powell.
Powell will deliver two days of testimony before Congress, beginning later in the day with the Senate and followed by the House on Wednesday. If Powell hints directly or indirectly that the US economy is showing signs of weakening, this will increase the likelihood of monetary policy easing and support gold. 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 77.1% probability of a rate cut in September, and a 86.7% probability of monetary policy easing in November. Lower rates reduce the opportunity cost of holding non-yielding bullion.
An important event this week will also be the publication of US inflation data for June (on Thursday). The May CPI report provided another welcome indication that inflation is slowing again after a sharp rise at the beginning of the year. The overall consumer price index remained unchanged for the month, which was the first unchanged value since July 2022. Falling energy prices and a slight rise in food prices helped keep the overall consumer price index under control. The core consumer price index rose by 0.2%, which was the smallest increase since August 2021. It is encouraging that steady service sector inflation has finally shown signs of easing, largely due to lower prices for airline tickets, vehicle insurance and accommodation away from home. The CPI is expected to have increased by 0.1% m/m in June, which corresponds to an increase of 3.1% year-on-year. The core CPI, according to forecasts, increased by 0.2% compared to May and by 3.5% per annum.