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Gold edges higher ahead of key inflation report, poised for monthly gain

May 31, 2024

Key points:

  • Gold is on track for its fourth consecutive monthly gain, showing resilience in the face of fluctuating economic indicators.
  • The market anticipates the April personal consumption expenditures price index, a critical measure for future Federal Reserve policies.

Gold prices showed a slight increase on Friday, marking a potential fourth consecutive monthly gain. Investors are keenly awaiting the U.S. inflation data which is expected to shed light on the Federal Reserve’s future moves.

Chart showing XAU/USD (Gold vs. US Dollar) trading at 2344.85 with a trend of 0.02% on a daily timeframe. The image includes moving averages and MACD indicators, reflecting a gradual increase in gold prices. Gold prices showed a slight increase on Friday, marking a potential fourth consecutive monthly gain. Investors are keenly awaiting the U.S. inflation data, which is expected to shed light on the Federal Reserve’s future moves.

Picture: Gold price shows slight increase on the VT Markets app.

Market fundamentals:

  • Gold’s current performance: As of early trading hours, spot gold was up by 0.2% at $2,346.18 per ounce, reflecting a weekly rise of 0.5%.
  • U.S. gold futures: These rose by 0.1%, reaching $2,345.20.
  • Monthly gains: This month, gold prices have climbed 2.7%, following a peak of $2,449.89 on May 20.

Federal Reserve policymakers maintain a cautious stance, expecting inflation to decline throughout the year despite a robust labour market. This has led them to maintain the policy rate between 5.25% and 5.5% since last July.

Economic indicators and market reactions:

  • Upcoming inflation data: The focus now shifts to the April personal consumption expenditures price index, due at 1230 GMT, which could influence the Fed’s policy trajectory.
  • Market expectations: Trading activities reflect a growing doubt about multiple rate cuts by the Fed in 2024, with current projections showing only about a 64% likelihood of a rate reduction by November.

Gold traditionally serves as an inflation buffer, yet higher interest rates could lessen its appeal by increasing the cost of holding non-yielding assets.

Read: 4 reasons why traders flock to safe-haven gold during global political tensions

Global metals market:

  • Nickel and palladium: Russian mining giant Nornickel recently revised its global nickel surplus forecast downward, yet anticipates a larger deficit in the global palladium market.
  • Corporate movements: Following BHP’s takeover bid for Anglo American in April, corporate leaders have been negotiating potential divestitures of platinum and iron ore assets in South Africa, stirring political debates.

Other precious metals:

Chart showing XAG/USD (Silver vs. US Dollar) trading at 30.932 with a trend of -0.69% on a 30-minute timeframe. The image includes moving averages and MACD indicators, reflecting slight declines in silver prices. Spot silver dropped by 0.2% to $31.11 per ounce, ahead of a key U.S. inflation report expected to influence market sentiment.

Picture: Further downside prevails as seen on the VT Markets app.

  • Silver and platinum: Both metals saw slight declines in their prices, with spot silver dropping by 0.2% to $31.11 per ounce and platinum decreasing by the same margin to $1,022.70.
  • Palladium: This metal also experienced a reduction, falling 0.2% to $946.25 per ounce.

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