Gold prices slip ahead of key inflation data

Gold prices slipped on Monday, dropping to $1,950 per ounce. If gold prices increase, resistance may be encountered near $1,983 per ounce, while if gold prices decline, support may be found near $1,938 per ounce. 

Gold prices have been predominantly directed by the dollar’s movement, as the competing gold typically loses appeal as an investment when the dollar rises. The dollar was steady on Monday, with the dollar index staying firmly above the 103.6 level. US Treasury yields also remained firm, with the US 10-year bond yield touching 3.74%.   

Major Central Banks continue to raise interest rates, causing economic uncertainty, which provides support for the safe-haven gold. Last week, the Reserve Bank of Australia and the Bank of Canada raised interest rates by 25bps. This week, the US Federal Reserve, the ECB, and the BOJ are holding their policy meetings, although only the EU is expected to hike rates this month.

The Federal Reserve has signaled a pause in rate hikes, weakening the dollar, and boosting gold prices. The U.S. Federal Reserve is holding its next policy meeting this Wednesday, June 14th and its outcome is expected to affect gold prices. 

Markets are pricing in an 80% chance that the Fed will not raise interest rates at its meeting this week for the first time in well over a year. Fed officials have signaled that the central bank will forego a rate hike, boosting gold prices. Expectations of a shift to a more dovish policy provide support for gold prices.

US CPI data for May are scheduled to be released on Tuesday, just a day before the Fed’s rate decision. This week’s CPI data may affect the Fed’s decision and can cause volatility in gold prices.

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Written by:
Myrsini Giannouli

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