Inflation Data Sparks Market Attention
6/30/2023
Gold experienced a slight gain in response to inflation data as the value of the dollar declined. However, the yellow metal remains close to its lowest point in the past few months.
The Commerce Department reported that inflation pressures eased somewhat in May, as consumers slowed their spending.
The personal consumption expenditures price index, which is a key indicator of inflation for the Federal Reserve, saw a .3% increase for the month, excluding food and energy. This figure aligns with the street’s expectations.
The core PCE, which reflects a year-on-year increase of 4.6%, was .1% point lower than anticipated.
The Federal Reserve pays close attention to inflation and the labor market data when determining monetary policy decisions. The personal consumption expenditure price index, the Fed’s preferred inflation measure, will release the May data on Friday.
During a speech in Madrid, Fed Chairman Jerome Powell stated that the central bank is likely to raise interest rates twice more in an effort to control inflation. This expectation further exerted downward pressure on gold prices since higher interest rates generally have a negative impact on the precious metal.
On Thursday, gold futures dropped by .2%, settling at $1,917.90 per ounce on Comex. So far this week, the front-month contract has experienced a .6% decline. Gold prices have decreased by 3.2% this month, following a .9% drop in May and a 0.6% increase in April. In 2022, gold fell by $2.40. Currently, the contract shows a slight increase of $1.8 (+0.09%) per ounce, trading at $1,919.70, while the spot price stands at $1,913.90.
According to the CME FedWatch Tool, approximately 86.8% of investors predict a 25-basis-point interest rate hike at the July monetary policy meeting, while 13.2% expect rates to remain unchanged.
Throughout this year, the Fed has increased rates by 25 basis points three times, in addition to 50 basis points in December and 75 basis points in June, July, September, and November 2022, with smaller increases in March and May of last year. These rate hikes sum up to a total of 5 percentage points since March 2022.
Next week, the monthly U.S. employment report for June will be released after markets close on Tuesday for the Fourth of July holiday. Investors will eagerly await the release of the minutes from the last Fed policy meeting on July 5, as they seek insights into the central bank’s decision-making process.
In its most recent meeting, the Fed maintained its benchmark federal funds rate at 5% to 5.25%, signaling a pause in its string of 10 consecutive rate increases implemented to combat inflation.
Silver futures dropped on Thursday by 1.2%, settling at $22.80 per ounce on the Comex. However, the most active contract experienced a 1.1% rally during the first four days of the week. Silver has decreased by 3.4% in June, following a 6.5% decline in May and a 4.4% increase in April. In 2022, silver prices rose by 3%. Currently, the contract shows a decrease of $0.148 (-0.65%) per ounce, trading at $22.650, while the spot price stands at $22.53.
Please note: The following post is intended solely for informational and thought-provoking purposes. It does not claim to accurately predict or forecast real-world outcomes. This editorial expresses an opinion and should not be taken as investment advice or a recommendation regarding specific securities, commodities, or actions. The author cannot be held responsible for these opinions.
