Gold price dropped below $1,930, its lowest level in three months, on Thursday. However, the US Dollar (USD) reversed its direction ahead of the weekend as it faced heavy selling pressure. High-impact data releases will not be on the economic agenda next week. Therefore, the market pricing around the Federal Reserve’s (Fed) interest rate outlook seems to drive the gold movement.
What happened to gold last week?
Monday had a quiet trading day. On Tuesday, China’s central bank cut its 7-day Reverse Repo Rate from 2.0% to 1.90%. On top of that, the gold price fell in the early hours of Tuesday. This decision raised concerns about the economic slowdown in China, the world’s largest gold consumer. These concerns pointed to the downside for gold. Later in the day, data from the US showed that inflation, as measured by the Consumer Price Index (CPI), declined to 4% year-on-year in May from 4.9% in April. With this data confirming that the Fed will interrupt the tightening cycle in June, the dollar began to weaken against its rivals. This was a positive development for gold.
On Wednesday, the Fed preferred to keep the policy rate constant in the range of 5-5.25%. However, the revised Projection Summary (SEP), called the dot plot, showed that the final rate estimate for the end of 2023 rose to 5.6% from the 5.1% projected in March. Although the dot chart also points to a total of 100 basis points (bps) rate cuts in 2024, FOMC Chairman Jerome Powell announced that a rate cut would only be appropriate when inflation falls. He also noted that not a single policy maker expects a rate cut this year. Powell, displaying a pigeon-holed stance, did not commit to a return to rate hikes as early as July when asked. However, the hawk dot chart provided a boost to US Treasury bond yields. For gold, this situation was negative.
on Thursday and Friday
Earlier on Thursday, the PBoC lowered its medium-term policy rate, the one-year Medium-Term Lending Facility (MLF), from 2.75% to 2.65%. Meanwhile, US bonds continued to rise after the Fed. This brought the gold price below $1,930, its weakest level since March. In the second half of the day, broad-based weakness in USD paved the way for a decisive recovery for gold. The European Central Bank’s (ECB) hawk tone and the poor US weekly Initial Unemployment Claims data, which showed 262,000 first-time unemployment claims in the week ended June 3, led to capital outflows from the dollar. Gold gained about 1% during the day.
Gold struggled to hold on to Thursday’s recovery gains ahead of the weekend as US Treasury bond yields rebounded. Consumer sentiment improved in the US in early June as the University of Michigan Consumer Confidence Index rose to 63.9 from 59.2 in May. The publication also revealed that the long-term inflation expectation remained almost unchanged at 3%.
next week for gold
On Tuesday, the PBoC will announce the one-year and five-year Loan Prime Rates. At this point, it wouldn’t be surprising if the PBoC lowered those rates as well. The reaction of the market will be short-lived, as the PBoC will not publish a policy statement with the interest rate decision. The US Department of Labor’s weekly Initial Unemployment Claims data will be watched closely by market participants on Thursday due to the stronger-than-usual impact on the dollar’s valuation lately. More than 30,000 drops in data will support the dollar. It will also create pressure for gold. On the other hand, a third reading above 250,000 will likely have an adverse effect on the pair. Late on Thursday, the Fed is due to release the results of the Bank Stress Test. “It is too early to know the full extent of the credit tightening due to the banking turmoil,” Chairman Powell said at the post-meeting press conference. said.
If the results paint a bleak picture for the banking sector, market participants will begin to reassess the Fed’s rate outlook. This will trigger another leg of dollar sales. On the other hand, if medium and small-sized banks are confirmed to be in a healthy position after the financial crisis in March, the US dollar could strengthen with rising US yields. This will mean bearish pressure for gold. On the last trading day of the week, S&P Global will release its preliminary Manufacturing and Services PMI for June. Business activity in the manufacturing sector is expected to continue to contract. In addition, the service sector remains in the expansion zone. It is necessary to pay attention to the details underlying the Service PMI report. The dollar is likely to lose strength if it signals a softening in input inflation in the services sector.
Prospects for Bitcoin
While the prospects for gold present an opposite situation, there is a different picture on the Bitcoin side. Especially the developments in the field of crypto money cause the expectations for Bitcoin to be different. Accordingly, the SEC’s pressure on the space pointed to a negative situation for Bitcoin this week. Also, Bitcoin had broken below $25,000, its lowest level since March.
cryptocoin.com When we look at it as a whole, there are expectations of a recovery especially for Bitcoin this week. The levels that are in the watch are between $26,700 and $27,000, indicating a move. On the other hand, failure to break these levels means a southward movement for BTC. BTC is trading at $26,570 at the time of writing.
Contact us to be instantly informed about the last minute developments. twitter‘in, Facebookin and InstagramFollow and Telegram And YouTube join our channel!
Risk Disclosure: The articles and articles on Kriptokoin.com do not constitute investment advice. Bitcoin and cryptocurrencies are high-risk assets, and you should do your own research and due diligence before investing in these currencies. You can lose some or all of your money by investing in Bitcoin and cryptocurrencies. Remember that your transfers and transactions are at your own risk and any losses that may occur are your responsibility. Cryptokoin.com does not recommend buying or selling any cryptocurrencies or digital assets, nor is Kriptokoin.com an investment advisor. Therefore, Kriptokoin.com and the authors of the articles on the site cannot be held responsible for your investment decisions. Readers should do their own research before taking any action regarding the company, assets or services in this article.
Disclaimer: Advertisements on Kriptokoin.com are carried out through third-party advertising channels. In addition, Kriptokoin.com also includes sponsored articles and press releases on its site. For this reason, advertising links directed from Kriptokoin.com are on the site completely independent of Kriptokoin.com’s approval, and visits and pop-ups directed by advertising links are the responsibility of the user. The advertisements on Kriptokoin.com and the pages directed by the links in the sponsored articles do not bind Kriptokoin.com in any way.
Warning: Citing the news content of Kriptokoin.com and quoting by giving a link is subject to the permission of Kriptokoin.com. No content on the site can be copied, reproduced or published on any platform without permission. Legal action will be taken against those who use the code, design, text, graphics and all other content of Kriptokoin.com in violation of intellectual property law and relevant legislation.