On Tuesday, Gold prices climbed as economic indicators from the United States hinted at consumer spending constraints, bolstering speculation that the Federal Reserve (Fed) may initiate an easing cycle later this year. XAU/USD traded at $2,327, marking a 0.51% increase.
The US Department of Commerce reported that May’s Retail Sales showed improvement compared to a downwardly revised April, but fell short of expectations. This data renewed hopes among investors for potential rate cuts, especially after the Fed indicated in its recent meeting that current monetary policy remains appropriate.
Additionally, Industrial Production data for May showed improvement following a downward revision for April.
Comments from Fed officials further influenced market sentiment. New York Fed President John Williams suggested a gradual reduction in interest rates if the disinflation trend progresses toward the Fed’s 2% annual core inflation target. While he avoided specifics on a September rate cut, Williams indicated optimism about the economic direction.
Richmond Fed President Thomas Barkin expressed caution, stating the need for more data before considering easing measures. Boston Fed President Susan Collins emphasized a measured approach, noting that a single positive inflation reading doesn’t necessitate rate cuts at this time.
Alberto Musalem, the newly appointed St. Louis Fed President, emphasized the importance of ongoing disinflation trends in his rate decision, leaning towards rate hikes if inflationary pressures subside.
Despite varying views among policymakers, US Treasury yields indicated growing expectations of rate cuts, with the 10-year Treasury note yield down six basis points at 4.219%.
Meanwhile, data from the Chicago Board of Trade (CBOT) showed traders anticipating a cumulative 36 basis points of easing by the end of the year via the December 2024 fed funds rate contract.
In summary, Gold prices climbed on Tuesday amid weaker-than-expected US Retail Sales data, reinforcing speculation that the Fed may consider easing monetary policy, despite mixed sentiments from Federal Reserve officials regarding the timing and necessity of rate cuts.
