Home Finance Gold prices decline as investors await fresh guidance on the Fed’s plan for interest rates

Gold prices decline as investors await fresh guidance on the Fed’s plan for interest rates

by CoinNews

Gold prices moved lower on Wednesday as investors awaited guidance on the Federal Reserve’s plan for interest rates ahead of minutes from the central bank’s June meeting due in the afternoon, and Friday’s monthly U.S. jobs data.

Prices for the precious metal had found some support in early dealings after weak Chinese service sector activity data, which suggested that world economic growth may be slowing.

Price action

  • Gold for August delivery

    fell $2.30, or 0.1%, to $1,927.20 an ounce on Comex.

  • September silver

    added 19 cents, or 0.8%, to $23.30 per ounce.

  • September palladium
    rose by $19, or 1.5%, to $1,246 per ounce, while October platinum
    gained 60 cents, or 0.1%, to $916.60 an ounce.

  • Copper for September delivery
    fell by 3 cents, or 0.8%, to $3.766 per pound.

Market drivers

“Fragile market confidence and a dip in equities on the back of concerns about the health of the global economy has seen investors keen to keep hold of their safe haven gold assets,” said Rupert Rowling, market analyst at Kinesis Money, in emailed commentary shared with MarketWatch.

Downbeat economic data released in the U.S., China and elsewhere in the past few days has helped to revive demand for gold, although the Federal Reserve and other central banks around the world are planning more interest-rate hikes.

In China, the Caixin private survey of the services sector showed activity slowed in June at a much faster pace than expected.

A barometer of U.S. manufacturing health released on Monday contracted for the eighth month in a row and sunk to its lowest level since May 2020, falling to 46% in June from 46.9% in the prior month. However, orders for U.S. manufactured goods rose 0.3% in May, the Commerce Department said Wednesday. This is the fifth gain in the past six months.

“China is the latest country to publish underwhelming economic data and investors are concerned that central banks’ aggressive stance to curb stubbornly high inflation will tip economies into recession,” Rowling added.

The Fed will release minutes from its June meeting shortly after gold futures settle for the session Wednesday.

The central bank held its benchmark interest rate steady for the first time in over a year at that meeting, but senior officials at the time also indicated another 50 basis points of rate hikes are on the table if inflation didn’t slow more rapidly.

Meanwhile, U.S. employment data for the month of June will be released at the end of the week.

“A hawkish set of Fed minutes and a robust U.S. jobs report is likely to deal a heavy blow to the zero-yielding metal, sending prices back below $1,900, with $1,893 and $1,858 acting as key levels of support,” said Lukman Otunuga, manager, market analysis at FXTM.

On the other hand, should gold prices push back above $1,932, with bulls gaining further support from a soft U.S. jobs report, this could open the doors back toward $1,959 and $1,985, respectively,” he said in market commentary.

Gold prices have fallen over the past two months as the prospect of higher interest rates benefits the U.S. dollar, which tends to have an inverse relationship with gold.

The ICE U.S. Dollar Index
a gauge of the dollar’s strength versus other major currencies, was up 0.1% at 103.17 in Wednesday dealings.

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