On Tuesday, gold (XAU/USD) held its position in the $2,330s range amid a cautious market mood following a mixed session for Asian stocks and a decline in investor interest in tech stocks on Monday.
Gold Awaits Fresh Catalysts
Gold dipped by about a third of a percent on Tuesday, maintaining a narrow trading range as investors awaited new macroeconomic and political developments. Key attention is focused on the upcoming release of the US Personal Consumption Expenditures (PCE) Price Index for May on Friday, the Federal Reserve’s preferred measure of inflation.
Speeches from Federal Reserve members Lisa Cook and Michelle Bowman on Tuesday could provide further insights into the future path of US interest rates, a crucial factor for gold as it affects the opportunity cost of holding the non-yielding asset.
San Francisco Fed President Mary Daly, on Monday, stated that she does not foresee the Fed cutting rates until there is confidence that inflation is on a path toward 2%. However, Daly also emphasized the importance of not neglecting the labor market, suggesting that if unemployment continues to rise, the Fed might consider rate cuts to support demand and employment.
Market-based probabilities for an interest rate cut at or before the Fed’s September meeting have increased to 67% from around 50% last week, according to the CME FedWatch tool, which bases its calculations on Fed Funds Futures prices. Such a cut would be positive for gold prices.
Geopolitical Tensions Influence Gold Prices
Gold’s safe-haven appeal is also being supported by ongoing geopolitical tensions. Upcoming elections in France and the United Kingdom add to the uncertainty, with the potential for significant political shifts. In France, there is a material risk of a swing to the far right, while in the UK, the Labor Party is expected to win on July 4, but the right-wing Reform Party is gaining support amid fresh scandals involving the Conservatives.
In the Middle East, geopolitical tensions remain high after a US-backed proposal to end the eight-month conflict in Gaza faltered. Israeli Prime Minister Benjamin Netanyahu agreed only to a “partial ceasefire,” according to Al Jazeera. Additionally, concerns about a potential full-scale war with Lebanon persist, as the Israeli government has advised residents of northern Israel, evacuated due to the conflict with Hezbollah, not to return until the end of August.
In Crimea, Russia blamed the US for a missile strike that killed at least four people, including children, and injured 151 others on a crowded beach. The missiles were US-made ATACMS, but the US denied responsibility, expressing regret over civilian casualties and stating that Ukraine makes its own targeting decisions.
Gold continues to trade in familiar territory, with its movements influenced by a combination of macroeconomic data, Federal Reserve policy signals, and geopolitical developments.
