In a positive development for the gold market, the gold contract closed higher for the second consecutive day on Tuesday, June 6. This surge was driven by expectations that the US Federal Reserve (Fed) would maintain its current interest rates at the upcoming meeting next week.
Gold futures experienced a rise of $7.20, equivalent to 0.36%, settling at $1,981.50 per ounce. Similarly, silver futures climbed by 3.50 cents or 0.15%, closing at $23.67 per ounce. Platinum futures also saw an increase of $2.30, or 0.22%, ending at $1,038.70 per ounce. Palladium futures rose by $1.50 or 0.1%, reaching $1,411.80 per ounce.
The strength in gold prices can be attributed to the widespread anticipation that the Fed will maintain its current interest rates during the upcoming meeting. This sentiment is supported by the latest data from the CME Group’s FedWatch Tool, which suggests that investors are placing a 75.9% probability that the Fed will keep interest rates between 5.00% and 5.25% at the June 13-14 meeting. In contrast, the likelihood of a 0.25% interest rate hike, raising the range to 5.25-5.50%, is estimated at only 24.1%.
This outlook follows a series of economic data releases in the United States, indicating a deceleration in inflationary pressures. Notably, the average hourly wages of workers increased by 4.3% in May compared to the previous year. Although this figure fell slightly short of analysts’ expectations of 4.4%, it remains a significant indicator of inflation trends for the Fed.
As investors closely monitor the market, attention will now shift to the release of the Consumer Price Index (CPI) for May on Tuesday, June 13, as well as the Producer Price Index (PPI) for the same month on Wednesday, June 14. The CPI serves as a measure of consumer spending inflation, while the PPI gauges inflationary pressures at the producer level. These upcoming reports will provide valuable insights into the overall economic landscape and potentially impact gold and other precious metal markets.
The Spot Market is Open
Wednesday, June 7, 2023