Gold prices experienced a decline today as investors maintained a cautious stance, eagerly awaiting the release of crucial US inflation data and the outcome of the US Federal Reserve meeting. Spot gold slipped by 0.3% to $2,302.89 per ounce, mirroring a similar downturn in US gold futures contracts, which fell by 0.3% to $2,320.20. Silver prices followed suit, dropping 1.9% to $29.22 per ounce, while platinum and palladium also registered losses, with platinum falling by 0.6% to $962.20 and palladium declining by 1.1% to $893.60.
In parallel, oil prices saw a downward trend on Tuesday amid the anticipation of key economic indicators. Brent crude futures experienced a slight dip of 13 cents, settling at $81.50 per barrel, while US West Texas Intermediate crude futures slipped by 7 cents to $77.67.
The Fed can still cut rates even when job gains remain solid. As the unemployment rate rises, the Fed could at some point conclude that the labour market is much softer than the nonfarm payroll numbers suggest and cut rates, according to David Kohl, Chief Economist, Julius Baer.
“At this week’s Federal Open Market Committee (FOMC) meeting, we expect the Fed to leave the federal funds target range unchanged at 5.25%–5.5% and to emphasise that there is still not enough evidence that inflation has fallen sufficiently while reiterating its commitment to adjust monetary policy if economic data warrants a looser policy stance,” Kohl noted. “We maintain our view that a further rise in the unemployment rate and a decline in inflation will allow the Fed to cut its key rate by 25bps at the September FOMC meeting.
“The focus at this week’s meeting will be much more on the updated ‘Summary of Economic Projections’ and the appropriate policy path of the FOMC members. In March, most FOMC members saw three 25bps rate cuts through to the end of 2024 as appropriate. We expect most members to shift to just two rate cuts in 2024 and the longer-run projection to move closer to 3% from 2.5%.”
Investors are closely monitoring the upcoming release of the Consumer Price Index for May and the Federal Reserve meeting results. These events are expected to provide valuable insights into inflationary trends and future monetary policy decisions, influencing market sentiment and asset prices in the coming days.