July 27, 2024
New Delhi, India
Gold prices
Gold prices staged a modest comeback, rising 0.80% to $2,385 after initially plummeting to a two-week low of $2,353. This recovery was largely fueled by market speculation that the Federal Reserve might reduce interest rates in their upcoming September meeting.
This anticipation follows a soft inflation report, suggesting a cooling economic environment conducive to rate cuts. The latest data from the US Bureau of Economic Analysis (BEA) highlighted that the Personal Consumption Expenditure Price Index (PCE), the Fed’s preferred inflation measure, inched up marginally over the previous month and closely approached the Federal Reserve’s target of 2%. Despite a monthly increase, the year-over-year data met expectations, reinforcing the case for a potential easing of monetary policy.
Key Data Points:
- Gold Price Recovery: Gold price makes a U-turn after diving to two-week lows of $2,353, now trading at $2,385, up 0.80%.
- Inflation Gauge: The US Bureau of Economic Analysis (BEA) revealed that the Fed’s favorite inflation gauge, the Personal Consumption Expenditure Price Index (PCE), ticked a tenth higher monthly than May’s data.
- Core PCE: June’s Core PCE edged up 0.1% month-over-month (MoM) and 2.5% year-over-year (YoY), aligning with forecasts. Core PCE expanded by 0.2% MoM, exceeding estimates, and 2.6% YoY, unchanged from the prior month’s reading.
Following the data, US bonds rallied, and consequently, US Treasury yields slumped, with the 10-year note sliding four and a half basis points to 4.202%. This decline in yields signals the market’s expectation of potential Fed rate cuts this year.
Additionally, the University of Michigan’s Consumer Sentiment Index slightly missed expectations, registering at 66.4 against the forecasted 66. Inflation expectations have also adjusted, with a one-year outlook dipping to 2.9%, while the five-year forecast remains stable at 3%.
The rebound in gold prices reflects investor sentiment and speculation regarding the Federal Reserve’s monetary policy direction. As traders keep a close eye on economic indicators and the upcoming Fed meeting, gold prices are likely to remain sensitive to any developments suggesting changes in interest rates.
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