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What’s happening: Gold recorded gains on Tuesday, moving back above the key $2,000 mark.
What happened: Weakness in the US dollar and bond yields lent support to the safe-haven yellow metal on Tuesday.
Traders also continued to assess the monetary policy outlook from major central banks around the world.
Why it matters: Gold rebounded on Tuesday, after declining more than 2% over the previous two sessions amid strength in the US dollar.
However, the US dollar retreated on Tuesday, with speculations of the US Federal Reserve putting a pause to its rate hikes after the widely expected 25bps increase in May. Higher interest rates generally reduce the demand for gold.
The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell around 0.3% to 101.75. Investors remained unmoved by St. Louis Fed President James Bullard saying the US central bank should continue to increase interest rates, given the recent strong economic data.
The European Central Bank is also gearing up to continue policy tightening at its meeting next month, although the size of the rate hike is still unclear.
The Monetary Authority of Singapore maintained its benchmark interest rate on Friday, joining other leading central banks including Canada, Australia, and India.
Despite weakness in gold during the past two trading sessions, the yellow metal remained close to levels not seen since March 2022.
Gold for June delivery gained $12.70 to close at $2,019.70 an ounce on Tuesday, while silver for May delivery added 17 cents to $25.26 an ounce.
May copper gained 2 cents to $4.09 a pound, while Palladium jumped to $1,642.90 per ounce, recording its strongest level in over two months, and platinum reached a three-month high.
What to watch: Traders will continue monitoring comments from US Fed officials this week, with the speakers entering a blackout period starting April 22, before May’s policy meeting.
The US dollar will also remain in focus, as the movement in the greenback impacts the demand for gold.
Context: The GBP/USD forex pair moved higher on Tuesday, as traders digested recent jobs data.
Details: Data released by the UK on Tuesday showed higher-than-expected pay growth, which fuelled speculations of the Bank of England continuing to increase interest rates in a bid to combat inflation.
UK’s pay growth was revised higher to 5.9% year-over-year to £638 in the three months to February. The figure came in higher than market expectations of 5.1%. Excluding bonuses, wages grew by 6.6% to £596.
The number of employed people rose by 169,000, above market estimates of a 50,000 increase. However, the UK’s unemployment rate surprisingly increased to 3.8% in the quarter, representing the highest level since the second quarter of last year. The data was also higher than market expectations of 3.7%.
UK’s consumer price inflation climbed to 10.4% in the twelve months to February 2023. The Bank of England said it expects inflation to ease below 4% by the end of the year. Markets widely expect the BoE to hike interest rates by 25bsp to 4.5% at its next meeting.
Weakness in the US dollar index also lent support to the GBP/USD forex pair on Tuesday.
The GBP/USD rose around 0.4% to 1.2424 on Tuesday. The British currency added 0.01% against the euro to 88.28 pence, after hitting its weakest level since March 23 on Monday.
London stocks surged for the eighth straight session on Tuesday. The FTSE 100 index gained 0.38% to settle at 7,909.44, while the domestically focused FTSE 250 added 0.05% to 19,296.32.
What are expectations: Traders await economic data on inflation rate, retail price index and producer prices from the UK today. The country’s annual inflation rate, which surprisingly rose to 10.4% in February, is expected to ease to 10.2% in March. Factory gate prices of goods produced by UK manufacturers, which declined for the seventh month to 12.1% year-over-year in February, are likely to ease further to 8.9% in March.
Other Markets: US trading indices closed mixed on Tuesday, with the S&P 500 and Nasdaq 100 up by 0.09% and 0.03%, respectively, and the Dow Jones index down by 0.03%.
Russia’s President Vladimir Putin visited Moscow-occupied areas of Ukraine’s southern Kherson region. The safe-haven US dollar index rose slightly this morning.
Japan’s Reuters Tankan sentiment index for manufacturers came in unchanged at -3 in April, remaining negative for the fourth consecutive month. The news exerted pressure on the JPY/USD forex pair.
The American Petroleum Institute said that US crude stockpiles had contracted by 2.675 million barrels in the week ended April 14, higher than market expectations of a decline of 2.464 million barrels. The news sent WTI crude oil prices slightly higher this morning.
The Colombian economy grew by 3.0% year-over-year in February, easing from 5.9% growth in the prior month, exerting pressure on the COP/USD forex pair.
Canada’s annual inflation rate eased to 4.3% in March, from 5.2% in the earlier month. The figure was the lowest since August 2021, which sent the CAD/USD pair lower in forex trading this morning.
Turkey’s consumer confidence index, South Africa’s consumer price index and retail trade, Eurozone’s consumer price inflation rate, construction output and current account, Italy’s current account, US MBA Mortgage applications, crude oil inventories, stocks of gasoline, distillate stocks and Fed minutes, India’s money supply M3, Brazil’s industrial production, Canada’s housing starts, industrial producer prices and raw materials price index, Russia’s producer price inflation, China’s foreign direct investment, as well as Argentina’s leading economic index.
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