Gold Prices Rise on Weaker US Retail Sales Data
Gold prices edged higher on Tuesday following the release of softer-than-expected U.S. retail sales data, which reinforced expectations that the Federal Reserve may lower interest rates this year. This news led to a decrease in the value of the dollar and Treasury yields, boosting the appeal of gold as a safe-haven asset.
Impact of Weaker Retail Sales Data on Gold Prices
Daniel Pavilonis, senior market strategist at RJO Futures, noted that the weaker-than-expected retail sales data contributed to the decline in the dollar and Treasury yields, providing support for gold prices. The U.S. retail sales only rose 0.1% in the previous month, falling short of economists’ forecast of a 0.3% increase in May.
Fed’s Potential Interest Rate Cut and Gold Market
The likelihood of a Fed rate cut in September stands at about 67%, according to the CME FedWatch Tool. Lower interest rates reduce the opportunity cost of holding gold, making the precious metal more attractive to investors. Despite a recent dip from its record high in May, gold prices remain resilient against headwinds like a strong dollar and high interest rates.
Insight into Gold Demand and Central Bank Reserves
Notably, China’s central bank paused gold purchases in May, negatively impacting the gold market. However, the World Gold Council’s annual survey revealed an increased interest among central banks to grow their gold reserves within the next 12 months. This indicates a potential boost in demand for gold in the near future.
Outlook for Silver, Platinum, and Palladium
Spot silver prices slightly decreased to $29.48 per ounce, but Nitesh Shah, commodity strategist at WisdomTree, believes that silver may receive support in the coming months due to a structural deficit in the market and the growing use of silver in solar panels. Platinum saw a 0.7% increase to $971.56, while palladium remained steady at $889.20.
Overall, the positive sentiment surrounding gold is supported by the potential for lower interest rates and continued interest from central banks in increasing their gold reserves, despite temporary setbacks in specific markets like China’s gold purchases.
