Profit-taking pulls gold away from its May high
Mon July 08 2024
Gold prices slipped on Monday, as investors booked profits after bullion hit a more than one-month high in the previous session on rising bets of US interest rate cuts in September. Spot gold fell 0.4% at $2,382.17/oz by 3.46am GMT, after rising to its highest level since May 22 on Friday. US gold futures eased 0.3% to $2,391.10.
Data on Friday showed that the unemployment rate hit a two-and-a-half-year high of 4.1%, pointing to a softer US labour market. “We’re getting a little bit of profit taken this morning because we had such a significant rally on Friday night after the payrolls data,” said Kyle Rodda, a financial market analyst at Capital.com.
Markets are expecting a 78% chance of a September rate by the Federal Reserve, according to CME’s Fedwatch Tool. Traders are also pricing in a rising chance of a second rate cut in December.
Lower rates reduce the opportunity cost of holding non-yielding bullion. Market focus this week is on Fed chair Jerome Powell’s semi-annual Congressional testimony, comments from a series of Fed officials, and US inflation data.
A soft US inflation report and a dovish tone from Powell when he testifies look like the ideal catalysts for gold to consider new highs, said Matt Simpson, a senior analyst at City Index. Elsewhere, top consumer China’s central bank refrained from gold purchases to its reserves for a second consecutive month in June.
“China may have paused their gold purchases, but it remains in demand overall. And that is likely to keep gold on bullish watch lists and tempt bullish bets upon any dips,” Simpson said. Spot silver fell 0.5% to $31.06 after hitting a one-month peak in the last session. Platinum edged 0.7% lower to $1,019.24 and palladium dropped 1.8% to $1,007.66.