Gold prices (XAU/USD) advanced for the second consecutive day on Tuesday, despite a stronger US Dollar, remaining near familiar levels as traders brace for significant upcoming data from the United States. Currently trading at $2,311, up 0.07%, the precious metal remains virtually unchanged as market participants adopt a wait-and-see approach ahead of the Federal Open Market Committee (FOMC) meeting, which will reveal the latest monetary policy decisions on Wednesday.
Market Overview
Tuesday’s US economic docket was light, featuring only the May NFIB Small Business Optimism Index, which surpassed both estimates and April’s data. Traders now turn their attention to Wednesday’s Consumer Price Index (CPI), expected to stay firm near April’s levels, indicating persistent inflationary pressures despite the Federal Reserve’s (Fed) significant rate hikes exceeding 500 basis points over the past few years.
Following the CPI release, the Fed, led by Chair Jerome Powell, will announce its monetary policy statement and the Summary of Economic Projections (SEP). The SEP includes the ‘dot plot,’ which outlines a “probable path” for future monetary policy.
Interest Rate Speculations
most analysts anticipate a 25-basis-point interest rate cut by the Fed in 2024. Additionally, data from the Chicago Board of Trade (CBOT) indicates that the December 2024 fed funds futures contract reflects an expectation of 28 bps of easing towards the end of the year.
Treasury Yields and Dollar Index
Meanwhile, the US 10-year Treasury note yield has edged down by six basis points to 4.41%, providing a headwind for gold. However, the DXY, an index measuring the US Dollar against six other currencies, has increased by 0.15% to 105.25.
Conclusion
As traders await the critical US economic data and the Fed’s upcoming decisions, gold prices remain steady. The outcome of the FOMC meeting and the CPI data will likely provide clearer direction for the precious metal’s near-term trajectory.
