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Gold prices advance for two consecutive weeks optimistic about rate pause

Commentaries & Views

In anticipation that the Federal Reserve will not raise its benchmark interest rate at the next FOMC meeting that ends on Wednesday, June 14 market participants have moved gold prices higher for the last two weeks.

Gold futures basis the most active August contract opened at approximately $1942 during the week beginning on Tuesday, May 30th. Gold traded to a lower low than the previous week but closed above the settlement price that occurred on the last trading day of the week. On Friday, June 2 gold futures settled at approximately $1972 after briefly trading to $2000 an ounce. This week gold opened at approximately $1962 and as of 5:15 PM EDT is currently fixed at $1975.70 after factoring in today’s decline of -$2.90.

Gains over the last two weeks come after pricing had been in a defined price correction which began during the first week of May when gold futures traded within a few dollars of the record high. The weeks beginning May 8, May 15, and May 22 all concluded with gold prices declining.

However, market sentiment reversed last week from bearish to bullish as market participants anticipate that the Federal Reserve will not raise rates as they have at the last 10 consecutive FOMC meetings beginning in March 2022. According to the CME’s FedWatch tool, there is a 71.2% probability that the Fed will not raise their benchmark interest rate for the first time in over a year, with only a 28.8% probability that they will raise rates by ¼%.

However, the pause in rate hikes could be short-lived according to the CME’s probability indicator. It is predicted that there is a 53% probability that the Fed will raise its benchmark rate by ¼%, and a 16.4% probability that they will raise rates by ½ % at the July FOMC meeting.

The BEA will release the PCE price index report on Tuesday. This is the preferred index used by the Federal Reserve and the report will contain the most current inflationary data for May 2023. This report will be the most current information on inflation that the Federal Reserve will use to make its final decision on its monetary policy.

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Wishing you as always good trading,

Gary S. Wagner

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.