Gold declines after bullish Fed remarks
Gold prices fell in European trade on Tuesday, resuming losses and approaching two-week lows and about to test the psychological barrier of $2300.
The decline came after aggressive remarks by a Fed official, which hurt the odds of a rate cut this year.
Prices
Gold prices fell 0.5% today to $2340 an ounce, with a session-high at $2356.
Gold rose 0.75% on Monday, the second daily session in a row away from two-week lows at $3325.
Aggressive Remarks
Minneapolis Fed President Neil Kashkari said on Tuesday that the Fed must wait for substantial progress in inflation before cutting interest rates.
He said the Fed should see a few more months of positive inflation data before moving towards policy easing.
He also warned that the Fed might raise interest rates if inflation failed to recede at a faster pace.
US Rates
Following the remarks, the odds of a Fed July interest rate cut tumbled to 8%, while the odds of such a cut in September fell to 45%, and to 60% in November.
According to the Fedwatch tool, traders barely expect a single Fed interest rate cut this year.
Important Data
Across this week, traders await a bunch of crucial US data that will have a big impact on the future of US interest rates.
That induces US housing prices, consumer confidence data today.
In addition, there’s US GDP growth data on Thursday, unemployment claims data, and finally the important personal spending data on Friday, the Fed’s favorite inflation gauge.
The SPDR
Gold holdings at the SPDR Gold Trust remained flat yesterday at 532.21 tonnes, the lowest since May 10.
Yen moves in a positive zone as Japanese treasury yields rally
Yen gained ground in Asian trade on Tuesday against a basket of major rivals, extending gains for the second straight session against the US dollar and moving away from three-week lows.
Yen’s movements come as Japan’s 10-year treasury yields rallied, while US 10-year yields fell, in turn reducing concerns about the widening yield gap.
Japan’s finance minister recently issued warnings around the yen’s weakness, which could have a negative economic impact.
The Price
The USD/JPY fell 0.1% to 156.69 yen, with a session-high at 156.95.
The yen rallied 0.1% against the dollar yesterday, the first profit in four days away from three-week lows at 157.20.
The recovery is buoyed by Bank of Japan Governor Kazuo Ueda recent remarks on achieving neutral interest rates.
Japan’s Yields
Japan’s 10-year government yields rose 1% today to a 12-year high at 1.034%, boosting yen.
The developments came amid expectations the BOJ will soon take a decision to reduce its government bonds purchases on the way to normalize policies.
US Yields
US 10-year treasury yields fell by 0.25% on track for the second straight loss, pressuring the greenback.
Markets await a batch of crucial US data and speeches by Fed officials later today to gauge the likely path ahead for policies.
The Yield Gap
The 10-year government yield gap between the US and Japan shrank to 340 basis points, the lowest since 2020, underpinning yen’s standing against the dollar.
Japan’s Finance Minister
The Japanese finance minister Shunichi Suzuki recently expressed concerns about the ongoing weakness of the yen, reiterating the government’s warnings towards the issue.
He said in front of Parliament that a weaker yen underpins exporters but increases burdens on corporations and consumers as it drives import prices much higher.
Wall Street closed for a bank holiday
The US markets are closed today for the Memorial Day holiday, and will resume operations tomorrow.
US stock indices, especially NASDAQ marked successive record highs in recent days, buoyed by odds of potential interest rate cuts by the Federal Reserve this year.
Gold rebounds as dollar loses ground
Gold prices rose in European trade on Monday, extending gains for the second day away from two-week lows, while the dollar lost ground.
Traders now await a batch of important US data later this week, in addition to remarks by several Fed officials to assess the odds of Fed rate cuts this year.
Prices
Gold prices rose 0.6% to $2347 an ounce, with a session-low at $2332, after closing up 0.25% on Friday, the first profit in four days away from two-week lows at $3325.
Gold prices tumbled 3.35% last week, the first weekly loss in three weeks, and the largest since December 2023.
Gold hit a record high last week at $2450 an ounce, with prices weighed down by diminishing odds of Fed rate cuts this week following the release of the bullish Fed’s May meeting minutes.
The Dollar
The dollar index fell 0.2% on Monday on track for the second session in a row against a basket of major rivals, providing further support to gold prices and other minerals.
US Rates
The odds of a Fed July interest rate cut stood at just 10%, and the odds for such a cut in September stood at 49%, and at 62% for November.
According to the Fedwatch tool, investors now barely expect a single Fed interest rate cut this year.
Important Data
Later this week, important US housing prices and consumer confidence data, in addition to GDP growth data, will be released, crucial for gauging the path ahead for US monetary policies.
The SPDR
Gold holdings at the SPDR Gold Trust fell 1.15 tonnes on Friday, the second decline in a row to a total of 532.21, the lowest since May 10.