Bullion Caught Between China Buying and US Rate Changes
2024-06-13
Summary:
Gold prices fell Thursday after an encouraging inflation report and the Fed reducing its rate cut expectations for this year from three to one.
Gold prices slipped on Thursday following an encouraging inflation report and the Fed's decision to scale back its rate cut expectations for this year from three to one.
The consumer price index showed no increase in May as inflation slightly loosened its stubborn grip on the US economy. The core reading increased by 0.2% for the month, compared to estimates of 0.3%.
Meanwhile, the central bank maintained its growth projections. Risky assets appear promising as the world's largest economy is likely to manage a "no landing" scenario while controlling soaring prices.
Demand for commodities, particularly gold, is surging in Asia despite prices hovering near the record highs reached in May. Industry officials report that buyers are snapping up gold to hedge against geopolitical and economic uncertainty.
In Japan, more investors are bullish on gold than bearish, according to the Bullion Market Association. Chinese investors are concerned about currency devaluation, a protracted real estate downturn, and trade tensions, prompting them to buy gold as a safeguard.
Lower confidence in other investment options is also driving the demand for gold, analysts say. Lending further support to bullion, four Russian naval vessels arrived in Cuba this week.
The yellow metal was still stuck in a tight range and Europe's political scene in chaos could help it stay above the 50 SMA in the near term. But more catalysts are need to clear the hurdle of $2,350.
Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
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