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Gold records gains on US economic data

Wednesday, June 19, 2024

Today’s headlines

What’s happening: Gold prices moved higher on Tuesday as investors digested the latest economic data released by the US.

What happened: Weaker-than-expected retail sales reported by the US raised speculations of the Federal Reserve cutting interest rates in 2024.

Some weakness in the US dollar also lent support to the safe-haven metal.

Why it matters: Data released by the US Commerce Department’s Census Bureau showed retail sales grew by 0.1% in May, following a 0.2% decline in April. The figure came in lower than market expectations of 0.3% growth, which signalled a worsening of consumer sentiment.

President of the Federal Reserve Bank of New York John Williams said that interest rates will come down gradually over time. He also said that inflation will continue to ease, while declining to comment on the timing of the central bank’s first rate cut.

The retail sales results increased speculations of a rate cut by the Fed at its September meeting. A lower interest rate decreases the opportunity cost of holding non-yielding gold.

Weakness in the US dollar provided a boost to gold prices as a lower greenback makes metals cheaper for foreign currency holders. The US dollar index, which measures the greenback’s performance versus a basket of major peers, declined around 0.1% to 105.26 on Tuesday.

The People’s Bank of China pausing its purchases of gold in May has been exerting pressure on the yellow metal. The World Gold Council’s annual survey of central banks saying that more central banks are planning to increase their gold reserves over the next 12 months lend support to the precious metal.

Gold for August delivery climbed $17.90 to settle at $2,346.90 an ounce on Tuesday. Prices for the yellow metal are still lower by around 6% versus the record high of $2,449.89 per ounce hit on May 20.

In other metals trading, silver for July delivery gained 17 cents to close at $29.56 an ounce. July copper added 4 cents to $4.49 per pound and platinum climbed around 0.7% to $977.2, while palladium slipped to $889.50.

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

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

Context: London stocks tracked the strength in European equities to close higher on Tuesday, putting a halt to a three-day decline.

Details: The FTSE 100 index has been trading range-bound between 8,100 and 8,200 over the past couple of weeks.

The Bank of England is scheduled to announce its interest rate decision on Thursday. Markets widely expect the central bank to keep rates unchanged at 5.25%.

Shares of Whitbread gained around 2.8% on Tuesday, after the company reported healthy earnings and reiterated its annual outlook. Frasers Group’s stock gained around 1% after the company disclosed a £80 million share buyback plan.

All FTSE 350 sectors closed in the positive zone on Tuesday, with the travel and leisure sector being among the top performers during the session.

London’s FTSE 100 gained 0.60% to settle at 8,191.29 on Tuesday, while the domestically focussed FTSE 250 index jumped 1.24% to close at 20,409.93.

The GBP/USD forex pair rose slightly to 1.2709 on Tuesday, while the STOXX Europe 600 Index gained 0.69% to settle at 515.01.

What to watch: Investors await the release of economic data on inflation rate, producer prices and retail price index from the UK today. The annual inflation rate in the UK, which fell to 2.3% in April, is expected to ease further to 2% in May.

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: US trading indices closed higher on Tuesday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.15%, 0.25% and 0.03%, respectively.

The news shaping the markets

Ukraine’s air defence systems shot down all 10 drones launched by Russia overnight to target the Zaporizhia and Dnipropetrovsk regions. The news sent the RUB/USD slightly lower in forex trading this morning.


Japan’s trade deficit narrowed to ¥1,221 billion in May, from ¥1,382 billion in the year-ago month. The latest reading coming in better than market expectations of ¥1,300 billion lent support to the JPY/USD forex pair.


New Zealand recorded a current account deficit of NZ$4.36 billion in the first quarter, versus a year-ago gap of NZ$4.66 billion. However, the secondary income gap widening during the quarter sent the NZD/USD pair lower in forex trading this morning.


The Central Bank of Chile lowered its benchmark interest rate by 25 basis points to 5.75%, sending the CLP/USD pair lower in forex trading this morning.


The American Petroleum Institute said US crude oil inventories grew by 2.264 million barrels in the week ending April 14, compared to a decline of 2.428 million barrels in the prior week, which sent the WTI crude oil prices slightly lower this morning.

What else to watch today

Eurozone’s current account, construction output and European Central Bank’s non-monetary policy meeting, South Africa’s consumer price index and retail trade, US NAHB/Wells Fargo housing market index, Russia’s producer price inflation, China’s foreign direct investment, Spain’s consumer confidence indicator, as well as Argentina’s unemployment rate, balance of trade and retail sales.


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