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What’s happening: Gold prices gained on Tuesday amid weakness in the US dollar.
What happened: The US dollar fell to more than a one-week low during Tuesday’s session ahead of inflation data due this week.
Both gold and silver recorded sharp gains due to increased demand for safe-haven assets.
Why it matters: Minutes from the Federal Reserve’s meeting released last week showed policymakers skewing towards maintaining interest rates at the current level.
Investors also monitored the latest comments from Fed officials. Minneapolis Federal Reserve President Neel Kashkari said the US central bank should hold off on reducing interest rates until substantial progress on inflation is visible. He added that the Fed might even consider increasing interest rates in case inflation does not slow down further.
This triggered increased speculations of the Fed delaying rate cuts to November, from the earlier expectation of September.
Meanwhile, gold demand from global central banks has remained elevated. Weakness in the US dollar provided a further boost to gold prices, as a lower greenback makes precious metal less expensive for foreign currency holders. The US dollar index, which measures the greenback’s performance versus a basket of major peers, closed almost flat on Tuesday after declining to more than a one-week low earlier in the session.
Gold for June delivery gained $22, or around 1%, to settle at $2,356.50 per ounce, while silver for July delivery jumped $1.64 to close at $32.14 per ounce on Tuesday.
In other metals trading, July copper rose 11 cents to $4.86 per pound. Platinum gained sharply to $1,066.8, nearing the 13-month high of $1,100 recorded on May 13, with the current macroeconomic environment resulting in increased demand for precious metals. Palladium also settled higher at $977.60.
What to watch: Investors await the release of US core PCE (personal consumption expenditures) price index, the Fed’s preferred inflation gauge, due to be released this Friday. The US core PCE price index, which increased by 2.8% year-on-year in March, is expected to rise by 2.8% in April. The PCE price index is projected to increase by 0.3% month-over-month in April, the same pace as in the prior month.
Context: European markets fell to their weakest level in around three weeks on Tuesday, ahead of key inflation reports due this week.
Details: Investors continued to monitor the European Central Bank’s monetary policy outlook, with wide speculations of interest rate cuts in June.
Investors will closely monitor inflation data from the Eurozone, scheduled for release on Friday, to get further insights into the central bank’s upcoming rate move.
On the economic data front, Germany’s wholesale prices fell by 1.8% year-over-year in April, following a 2.6% decline in the previous month. The region’s producer prices fell for the twelfth straight month in April but was the smallest decline since August 2023.
The STOXX Europe 600 Index fell 0.6% to close at 519.08 on Tuesday, with most sectors closing in the negative territory. Travel and leisure stocks were among the worst performers, shedding about 2.6% during the session.
London’s FTSE 100 declined 0.76% to settle at 8,254.18 on Tuesday, to record the fifth straight session of decline, with the UK heading into general elections in July.
Germany’s DAX 40 fell 0.52% to 18,677.87, while France’s CAC 40 lost 0.92% to close at 8,057.80.
What to watch: Investors await the release of economic reports on loans to non-financial corporations, household credit growth and money supply M3 from the Eurozone today. Lending to companies in the Eurozone, which increased by 0.4% year-over-year to €5.132 trillion in March, is expected to rise by 0.3% in April.
Analysts expect bank lending to households to rise by 0.4% year-over-year in April, following a 0.2% gain in March. The M3 measure of money supply in the Eurozone is expected to increase by 1.3% year-over-over in April, compared to a 0.9% rise in the prior month.
Other Markets: US trading indices closed mixed on Tuesday, with the S&P 500 and Nasdaq 100 up by 0.02% and 0.32%, respectively, and the Dow Jones index down by 0.55%.
Ukraine’s President Volodymyr Zelenskyy received another military aid worth $1 billion from Europe for its ongoing war with Russia. The news sent the safe-haven US dollar index higher in forex trading this morning.
Canada’s industrial producer prices accelerated by 1.5% in April. This came in above market estimates of 0.8% and exerted pressure on the CAD/USD forex pair.
Brazil’s mid-month consumer price inflation increased to 0.44% in May, from 0.21% in the prior month. However, the latest reading came in lower than market expectations of 0.48%, which sent the BRL/USD pair slightly higher in forex trading this morning.
Ireland’s retail sales contracted 1.2% in April, versus a 2.1% rise in the prior month, which exerted pressure on the EUR/USD forex pair.
US S&P CoreLogic Case-Shiller home price index gained by 7.4% year-over-year in March. This being the highest gain since October 2022 sent the Nasdaq 100 higher by around 0.3% on Tuesday.
Germany’s GfK consumer climate indicator and consumer prices inflation, France’s consumer confidence indicator, Spain’s retail sales, Italy’s manufacturing confidence index and consumer confidence index, Brazil’s IGP-M inflation, gross debt to GDP, government budget value and unemployment rate, US MBA mortgage applications, Redbook index, Richmond Fed manufacturing index, Richmond Fed services index, Dallas Fed general business activity index, Dallas Fed revenue index, Fed Beige Book and API’s crude oil inventories, India’s money supply M3, Russia’s industrial production, as well as Canada’s CFIB business barometer.
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