On Monday, early Asian trading hours saw gold prices (XAU/USD) retreat to $2,325, influenced by the Federal Reserve’s ongoing cautious approach. Investors are closely monitoring the US June ISM Purchasing Managers Index (PMI), expected to improve to 49.0 from May’s 48.7.
The decline in gold prices follows the US Personal Consumption Expenditures (PCE) Price Index readings, which, although meeting expectations, remain elevated. The Federal Reserve has maintained its cautious stance, responding to the headline PCE rising 2.6% year-on-year in May, down slightly from April. Similarly, core PCE inflation moderated to 2.6% from 2.8% in April, aligning with market forecasts.
Federal Reserve Bank of San Francisco President Mary Daly emphasized that while monetary policy is effective, it’s premature to determine when interest rate cuts may be appropriate. Daly cautioned, highlighting that persistent or slow-moving inflation could necessitate prolonged higher interest rates, a factor typically negative for gold prices due to increased opportunity costs of holding non-yielding assets.
Meanwhile, Federal Reserve Bank of New York President John Williams underscored ongoing concerns about inflation levels, affirming the central bank’s commitment to reducing them. Fed Governor Michelle Bowman echoed sentiments, suggesting openness to further rate adjustments should inflation indicators remain stubbornly high.
These remarks underscore the delicate balance facing the Federal Reserve as it navigates economic data and inflationary pressures, influencing market sentiment and gold’s price trajectory amidst global economic uncertainties.
