(Kitco News) - Gold and silver prices continue to churn in the middle of their respective ranges with little momentum on either side of the trade.
Analysts have said that they expect gold and silver to remain range-bound as traders will be hesitant to take any significant positions ahead of Friday’s Personal Consumption Expenditures (PCE) Index.
In line with the overnight price action, precious metals are starting the North American trading session relatively subdued. August gold futures last traded at $2,339.10 an ounce, down 0.22% on the day. Meanwhile, silver futures last traded at $29.61 an ounce, up 0.29% on the day.
Analysts note that while gold’s long-term uptrend remains well supported, the short-term price action continues to be driven by uncertainty surrounding the Federal Reserve’s monetary policy.
“The bullion price continues to be influenced primarily by US interest rate expectations, and the stability in recent sessions reflects the lack of strong indications regarding the Federal Reserve’s monetary policy for the second half of the year,” said Ricardo Evangelista, Senior Analyst at ActivTrades, in a note Tuesday.
Evangelista added that because monetary policy expectations are balanced on a knife’s edge, Friday’s inflation data will have an outsized impact on gold and silver.
“May’s inflation reading showed an easing in consumer price increases, but a stronger-than-expected PMI reading highlighted the resilience of the US economy, suggesting that higher interest rates for a longer period are still a possibility for the Fed,” he said. “In this context, Friday’s release of PCE data, considered the Fed’s preferred inflation gauge, could shake the markets and potentially cause gold prices to break out of their recent range.”
Barbara Lambrecht, commodities analyst at Commerzbank, said that she expects gold to remain range-bound until there is a clear view of the Federal Reserve’s monetary policy.
“We think that the upside price potential for gold is limited in the short term, as the first interest rate cut in the U.S. is only expected to take place at the end of the year,” she said.
While Friday’s inflation data is the main event this week, gold and silver could see some volatility Tuesday morning following the Conference Board’s Consumer Confidence report.
Economists note that weak consumer confidence highlights the risk of softer consumption, which would drag down economic activity ahead of the year's second half.
Some commodity analysts have said that weak economic data remains supportive of gold. In an interview with Kitco News last week, Chantelle Schieven, Head of Research at Capitalight Research, said that she expects the Federal Reserve will be quick to cut rates if the economy starts to weaken materially, even if inflation remains stubbornly elevated.
Finally, analysts note that gold and silver remain well supported as geopolitical uncertainty dominates global financial markets. Some analysts have said the precious metal could be sensitive to Thursday’s Presidential debate between former President Donald Trump and incumbent President Joe Biden.
Analysts note that gold is becoming sensitive to the U.S. government’s rising debt ahead of the 2024 November Election; however, neither candidate has provided any prudent fiscal plan to reduce the trajectory.
