Gold moves in a positive zone ahead of US inflation data
Gold prices rose in European trade on Wednesday, extending gains for the second straight day and heading for multi-week highs as both the dollar and US treasury yields lose ground.
It comes ahead of important US consumer prices data which will cast light on the future of US interest rates.
The data comes following producer prices data released yesterday, which included sharp downward revisions for March, in turn boosting the odds of a Fed rate cut in the summer.
Prices
Gold prices rose 0.6% today to $2372 an ounce, with a session-low at $2355.
The precious metal rose 0.95% yesterday, resuming gains and moving away from two-week highs at $2378.
The Dollar
The dollar index fell 0.25% on Wednesday, extending losses for the third straight session and plumbing two-week lows at 104.81 against major rivals.
A weaker dollar makes gold-denominated futures cheaper to holders of other currencies.
US Yields
US 10-year treasury yields fell by 0.5% today to a five-week low at 4.418%, underpinning non-yielding assets, following US producer prices data.
US Producer Prices
US producer prices rose 0.5% m/m in April, passing estimates of 0.3%, however, March’s reading was revised to show a contraction of 0.1% instead of a 0.2% increase.
Core producer prices rose 0.5% m/m in April, above estimates of 0.2%, with the March reading revised to show a 0.1% decline.
On a yearly basis, US producer prices rose 2.2% in April, with the March reading reduced to show a 1.8% increase.
US Rates
Following the data, the odds of a Fed interest rate cut in July rose to 30%, and the odds of such a cut in September rose to 70%.
According to the Fedwatch tool, investors are expecting two interest rate cuts overall by the Federal Reserve this year.
US Producer Prices
Now investors await US producer prices data later today, expected to clock in at 3.4% for April, down from 3.5% in March.
The SPDR
Gold holdings at the SPDR Gold Trust remained flat yesterday at a total of 831.93 tonnes, the lowest in a week.
Aussie parks at two month highs even as Australian wages slow down
The Australian dollar rose in European trade on Wednesday against a basket of major rivals, extending gains for the third straight session against the US dollar and hitting a two-month high amid mounting risk appetite.
Such considerations overshadowed earlier data that showed Australian wages slowed down in the first quarter of the year, in turn reducing pressures on the Reserve Bank of Australia and boosting the odds of a rate cut this year.
The Price
The AUD/USD pair rose 0.4% to 0.6651 today, the highest since March 8, with a session-low at 0.6622.
The pair rose 0.3% yesterday, the second profit in a row as most major currencies advance on the US dollar.
Positive Sentiment
Markets are dominated by a wave of positive sentiment as US long-term treasury yields tumbled following producer prices data.
Even as US producer prices rose past estimates last month, the surprise was in the revisions to the March reading.
US Producer Prices
US producer prices rose 0.5% m/m in April, passing estimates of 0.3%, however, March’s reading was revised to show a contraction of 0.1% instead of a 0.2% increase.
Core producer prices rose 0.5% m/m in April, above estimates of 0.2%, with the March reading revised to show a 0.1% decline.
On a yearly basis, US producer prices rose 2.2% in April, with the March reading reduced to show a 1.8% increase.
US Rates
Following the data, the odds of a Fed interest rate cut in July rose to 30%, and the odds of such a cut in September rose to 70%.
According to the Fedwatch tool, investors are expecting two interest rate cuts overall by the Federal Reserve this year.
Australian Wages
Earlier Sydney data showed quarterly wages rose by 0.8% in the first quarter, below estimates of 0.9%.
Such data reduces inflationary pressures on the RBA and paves the way for a likely interest rate cut this year.
Wall Street heads higher after Powell's remarks
Most US stock indices rose on Tuesday following important data and remarks by Fed Chair Jerome Powell.
Earlier US data showed producer prices rose by 2.2% y/y in April, up from 1.8% in March. It’s the fastest pace in a year.
Otherwise, Fed Chair Jerome Powell said he expects US inflation to decline in upcoming months, which was taken as a sign of impending policy easing.
However, Powell cautioned he’s still not completely confident about the estimates, although he did rule out another rate cut given the recent data.
On trading, Dow Jones rose 0.1%, or 7 points as of 16:59 GMT to 39,424, while S&P 500 rose 0.1%, or a point to 5,222, as NASDAQ climbed 0.3%, or 41 points to 16,429.
Bitcoin slides ahead of Powell's remarks
Bitcoin lost over 2.5% on Tuesday, trending lower for the first time in four days amid risk aversion following US producer prices data, which hurt the odds of an early Fed interest rate cut.
Now traders await more clues later today, including a speech by Fed Chair Jerome Powell in Holland.
The Price
Bitcoin fell 2.8% at Bitstamp today, or $1,766 to $61,151, with a session-high at $63,075.
Bitcoin rose 2.4% on Monday, the third profit in a row amid strong purchases around the $60,000 barrier.
Crypto Market Value
Crypto market value fell by over $40 billion today to a total of $2.380 trillion as both ethereum and bitcoin carry losses.
US Yields
US 10-year treasury yields rallied by a single basis point to a week high at 4.534%, hurting risk appetite.
The gains came after earlier US producer prices data, which surpassed estimates and underlined the ongoing threat of inflation.
US Rates
Following the data, the market odds of a July interest rate cut stood at 25%, and the odds of a September rate cut stood at 63%.
Powell
Fed Chair Jerome Powell is expected to speak in Amsterdam later today, and will take audience questions on the future of inflation and interest rates.