Gold prices fell in European trade on Wednesday for the first time in seven days away from recent record highs amid active profit-taking, while investors hold off major positions ahead of the Fed Chair Jerome Powell’s speech about the future of US interest rates.

Bearish remarks will boost the odds of a June Fed interest rate cut, in turn sending gold prices towards fresh record highs.

Prices 

Gold prices fell 0.5% to $2270 an ounce, with a record high at $2288, after gold prices rallied by 1.3% on Tuesday, the sixth profit in a row amid concerns about inflation and geopolitical tensions.

The gains are also boosted by somewhat bearish remarks by several Fed officials on the future of US interest rates.

Powell 

Fed Chair Jerome Powell is speaking at Stanford University later today, expected to reveal new clues on the future of US policies. 

Bearish Fed Remarks

San Francisco Fed President Mary Dale, and Cleveland Fed President Loretta Mister, both said that the Fed will likely cut interest rates three times this year.

US Rates

Following their remarks, the odds of a June Fed interest rate cut rallied from 57% to 63%. 

Now investors await important US data later today on private sector employment and the services sector in March. 

Gold Performance Projections

JPMorgan's analysts foresee gold prices hitting $2500 an ounce this year.

Goldman Sachs' analysts project a minimum price target of $2300 an ounce for this year, anticipating policy easing by the Federal Reserve.

The SPDR

Gold holdings at the SPDR Gold Trust rose 2.02 tonnes yesterday to a total of 829 tonnes, away from recent March 13 lows. 

Euro rose in European trade on Wednesday against a basket of major rival, extending its recovery from two-month lows against the dollar ahead of major European inflation data for March, which will help determine the likely path ahead for European policies. 

Cold data will boost the case of an early ECB interest rate cut in June, which will renew concerns about the US-Europe policy gap.

EUR/USD

EUR/USD rose 0.1% to $1.0779, with a session-low at $1.0766, after rising 0.25% on Tuesday away from two-month lows at $1.0725. 

Interest Rate Gap 

The current US-Europe interest rate gap stands at 100 basis points, the lowest since May 2022, and is expected to expand to 125 basis points next June if the ECB went ahead with a rate cut while the Federal Reserve abstained.

European Rates

Recent bearish remarks by several ECB policymakers bolstered the case for an early interest rate cut in June, with markets estimating a total of 90 basis points of rate cuts this year.

Inflation Data

Later today, consumer prices data for Germany and other European countries will be released, while tomorrow, data for the whole euro zone will be released.

Euro Performance Estimates

Credit Agricole’s forex analysts expect the dollar to outperform the euro relatively, as the euro is exposed to potential downward inflationary shocks this week.

Corn and soybean futures fell on Tuesday at the Chicago Exchange, following reports of projected high inventories for multiple years, even as farming is expected to decline in 2024.

The US Agricultural Ministry said in its quarterly report that corn inventories surged to 8.347 billion bushels as of March 1, a five-year high. A separate report by the ministry expects farmers to cut down corn farming by 5% this year. 

The US ministry’s report also showed soybean inventories surged to a two-year high at 1.845 billion bushels, while wheat inventories surged to 1.087 billion bushels, a three-year high. 

Analysts expect Ukrainian farmers to increase the farmed space for soybeans this year by 23.5% to 2.199 million hectares, while corn farming spaces will likely decline by 4.5% this year to 3.863 million hectares. 

Romania, the EU’s fourth largest wheat producer, and third largest corn producer, harvested 9.6 million tonnes of wheat in 2023, an 11% increase, and harvested 8.52 million tonnes, a 6% increase compared to 2022. 

Otherwise, Egypt, the world’s top wheat importer, announced plans to purchase 3.5 million tonnes of local wheat in the 2024 purchasing season.

The Saudi government also launched bids to purchase 595 thousand tonnes of wheat for the period between June and July. 

Otherwise, official French data showed that soft wheat harvests remained stable last week, while still at four-year lows overall, with damp weather since the fall hampering agriculture and early crop development in France, the EU’s largest grain producer. 

Corn

Corn futures due in May fell 1.8% at the end of the session to $4.26 a bushel.

Soybeans 

Soybean futures due in May fell 0.8% to $11.74 a bushel. 

Wheat 

Wheat futures due in May fell 2.1% to $5.45 a bushel. 

Oil prices rose on Tuesday amid mounting geopolitical tensions in the Middle East, while Ukraine intensified its attacks on Russian energy infrastructure. 

A guided Ukrainian plane executed airstrikes against Russia’s third largest oil refinery, following a similar series of attacks in March, which curtailed Moscow’s refinery capacity by 14%. 

Tomorrow, OPEC+ members will convene to discuss market developments, with analysts expecting no change in production policies. 

The Energy Information Administration in the US will also announce official crude inventory data tomorrow, expected to show a decline of 300 thousand barrels. 

On trading, Brent June futures rallied 1.7%, or $1.5 to $88.92 a barrel, the highest since June 2022. 

US crude futures due in May rose 1.7%, or $1.44 to $85.15 a barrel, the highest since June 2022.