Gold edges lower on prospects of hawkish US Fed rate-hike path

GOLD prices edged lower in early Asian trade on Monday (Jul 3), helped by a slightly stronger US dollar, with chances of more interest rate hikes by the Federal Reserve weighing on bullion’s appeal.

Spot gold was down 0.1 per cent to US$1,917.19 per ounce by 0053 GMT while US gold futures fell 0.2 per cent to US$1,925.10.

Bullion in June ended 2.2 per cent lower, also falling 2.5 per cent for the second quarter, on expectations of a longer Fed rate hike path ahead.

The dollar index was steady near a two-week high hit on Friday, making gold expensive for holders of other currencies.

US consumer spending stagnated in May on Friday, while the Fed’s preferred core PCE price index, excluding food and energy, increased 4.6 per cent on a year-on-year basis in May after advancing 4.7 per cent in April.

Investors see an 84 per cent chance of a 25-basis-point hike in July, according to CME’s Fedwatch tool, pricing in another 25 bps rate hike in November, bringing rates into the 5.5-5.75 per cent range before cuts are seen in 2024.

Investors will also watch for minutes of the Jun 13-14 FOMC meeting being released on Jul 5.

High-interest rates discourage investment in non-yielding gold.

In Japan, business sentiment improved in the second quarter, but factory activity contracted in June.

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Gold struggles for momentum as traders await key US inflation data

Over in the US, the Institute of Supply Management’s (ISM) nationwide PMI reading is expected, but the trading volume could be light on Monday due to a US holiday on Jul 4.

Spot silver was little changed at US$22.74 per ounce, platinum fell 0.1 per cent to US$900.19 while palladium rose 0.4 per cent to US$1,232.06. REUTERS