Gold prices are poised to achieve a second consecutive weekly gain, driven by safe-haven demand amid Middle East tensions and growing expectations of Federal Reserve rate cuts later this year. Spot gold rose 0.1% to $2,360.95 per ounce on Friday, reaching its highest level in two weeks during the previous session, with a weekly increase exceeding 1%. US gold futures also climbed 0.2% to $2,374.60.
In other metals, silver fell 0.4% to $30.60 per ounce in spot transactions, while platinum rose 0.4% to $982.45 and palladium advanced 0.8% to $930.98, with all three on track for weekly gains.
Dollar gains
The US dollar strengthened, hitting an eight-week high above 159 yen and remaining near a five-week peak against the British pound. The dollar index, measuring its performance against six major currencies, rose 0.41% following the Swiss National Bank’s second consecutive interest rate cut and signals from the Bank of England hinting at a reduction in August.
On Wednesday, headline inflation reported for May fell to the BoE’s target of 2% for the first time since mid-2021, but services inflation, which the BoE uses as a gauge for domestic inflationary pressures, remained sticky at 5.5%. “Therefore, policymakers will remain data-driven and wait for services price inflation to fall further before following their European counterparts in cutting rates,” noted David A. Meier, Economist, Julius Baer. “The only significant clue for the markets came in Governor Bailey’s statement, which noted that recent data has moved in the right direction to warrant a rate cut.
“This boosted market confidence that UK rates will indeed be cut sooner rather than later.”
The yen weakened after the Bank of Japan refrained from reducing its bond purchasing program until its July meeting, intervening to bolster the currency after it hit a 34-year low against the dollar in April. The dollar edged down to 158.87 yen after reaching 159.12 yen earlier. The dollar index eased 0.09% to 105.54, poised to end the week stable after two consecutive weeks of gains.
Sterling gained 0.05% to $1.26, near its lowest level since May 17, following the Bank of England’s decision to keep interest rates unchanged amid balanced policy views. The euro recovered 0.17% to $1.07, partially offsetting its decline from the previous session as the European Central Bank initiated rate cuts earlier this month.
Despite slowing inflation and labour market challenges, the Federal Reserve maintained US interest rates in June and revised down earlier expectations of multiple cuts to just one, reflecting cautious economic outlooks.
