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Gold falls as USD rises on Fed’s hawkish stance

Wednesday, June 26, 2024

Today’s headlines

What’s happening: Gold prices moved lower on Tuesday amid a strengthening US dollar.

What happened: Gold prices have climbed almost 13% year to date with support from purchases by central banks of the yellow metal.

Hawkish remarks from US Federal Reserve Governor Michelle Bowman exerted pressure on the safe-haven metal.

Why it matters: While the US dollar remains the world’s reserve currency, continued gold purchases by central banks have increased the ratio of the yellow metal as the safe-haven asset of choice.

A recent survey by the World Gold Council indicated a preference by most of the central banks to increase their gold reserves over the next five years, while lowering their reserves of the US dollar. Some central banks intend to increase their gold purchases over the next 12 months.

Despite this, gold came under pressure on Tuesday after Federal Reserve Governor Michelle Bowman’s hawkish comments on Tuesday, which sent the US dollar higher. A strengthening greenback makes gold more expensive for foreign currency holders and lowers its demand.

Federal Governor Bowman said there were still several “upside inflation risks” and that interest rates could remain at the current level “for some time” to bring inflation under control. She added that she was willing to even raise rates if needed.

The US dollar index, which measures the greenback’s performance versus a basket of major peers, rose around 0.15% to 105.64 on Tuesday.

Gold for August delivery declined by $13.20 to $ $2,319.20 an ounce on Tuesday. Meanwhile, silver for July delivery shed 31 cents to $29.18 an ounce. The silver metal is still up more than 20% year to date.

What to watch: Investors will continue monitoring comments from the officials of major global central banks. Movements in the US dollar will also remain in focus.

The markets today

Japanese stocks will be in focus ahead of a basket of major economic reports

Context: Japan’s Nikkei 225 climbed on Tuesday to its highest closing in more than two months.

Details: The strong selloff in Nvidia’s share not only impacted semiconductor chip stocks around the world.

Weakness in the Japanese yen lent support to export-related stocks. The Japanese yen was shorted versus several major currencies on Tuesday. The JPY/USD slumped to ¥160.

Despite the steady downturn in the yen this year, Japanese officials have remained tight-lipped about any intervention in the currency market. Shares of Toyota Motor Corp and Chugai Pharmaceutical Co added around 5% on Tuesday.

Japan’s Nikkei 225 gained 0.95% to settle at 39,173.15 on Tuesday, representing its highest close since April 15. The broader Topix added 1.72% to reach 2,787.37.

What to watch: Investors await the release of economic data on retail sales, foreign bond investment and stock investment by foreigners from Japan. The country’s retail sales grew by 2.4% in April, from 1.1% in the previous month, representing the softest pace in two years.

Bond Investments by Japanese investors grew by ¥653.60 billion in the week ending June 15, while Stock investments by foreigners in Japan grew by ¥80 billion.

Analysts expect producer prices to increase 0.1% in May, following a 0.2% rise in April, while the retail price index is projected to decline to 3.1% year-over-year in May, from 3.3% in April.

Other Markets: European indices closed lower on Tuesday, with the Stoxx 600, FTSE 100, DAX, and CAC 40 down by 0.23%, 0.41%, 0.61%, and 0.58%, respectively.

The news shaping the markets

Indian Prime Minister Narendra Modi plans to visit Russia for the first time since the attack on Ukraine. The news sent the RUB/USD slightly higher in forex trading this morning.


Canada’s annual inflation rate accelerated to 2.9% in May, from the three-year low of 2.7% in April. The figure also came in higher than market expectations of a slowdown to 2.6% and exerted pressure on the CAD/USD forex pair.


Brazil’s government revenues climbed to R$228.9 billion in April, reflecting 8.26% year-on-year growth. Despite this being the strongest revenue performance for April since 2020, the BRL/USD pair edged lower in forex trading this morning.


Australia’s consumer price index increased 4.0% in the year to May, up from 3.6% in April. The figure also came higher than market estimates of 3.8% and exerted pressure on the AUD/USD forex pair.


The American Petroleum Institute said US crude oil inventories grew by 0.914 million barrels in the week ending June 21, following an increase of 2.264 million barrels in the prior week, which sent the WTI crude oil prices slightly lower this morning.

What else to watch today

Singapore’s industrial production, GfK consumer confidence, France’s consumer confidence and unemployment benefit claims, UK’s CBI distributive trades, US MBA mortgage market index and new home sales, Brazil’s bank lending, India’s money supply, Canada’s wholesale sales, Russia’s corporate profits and industrial production, Argentina’s current account, Korea’s business confidence, UK’s car production and EIA’s crude stockpiles.


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