Gold futures experienced an increase on Tuesday as market participants evaluated the potential impact of interest rates ahead of the upcoming Federal Reserve policy meeting scheduled for next week.
In terms of price movement, August delivery gold on Comex rose by $2.40, or 0.1%, reaching $1,976.70 per ounce. Throughout the trading session, it fluctuated between a low of $1,970.30 and a high of $1,982.90, according to FactSet data. Meanwhile, July silver lost 11 cents, or 0.4%, and traded at $23.53 per ounce. July platinum recorded a slight increase of nearly 0.1% to $1,037.10 per ounce, whereas September palladium declined by 0.5% to $1,403 per ounce. July copper experienced a 0.4% decrease, reaching $3.7515 per pound.
Edward Moya, a senior market analyst at OANDA, explained that gold prices were fluctuating as investors monitored the progress of the recent stock market rally and considered whether the disinflationary trend might prompt the Federal Reserve to postpone a rate hike in the upcoming meeting. Moya noted that demand for safe-haven assets had somewhat eased, and traders were waiting to observe if the next market risk would trigger a de-risking moment.
On Monday, gold prices experienced an upswing following a disappointing U.S. services index reading from the Institute for Supply Management. This contributed to traders lowering their expectations for an interest rate hike during the Federal Reserve's upcoming meeting.
According to Fed-funds futures traders, the probability of a quarter percentage point rate hike in June has fallen to less than 20%, compared to nearly 67% a week earlier. However, there is still a likelihood of more than 60% that rates will rise by the end of the Fed's July meeting.
Thu Lan Nguyen, an analyst at Commerzbank, stated that the precious metal's future direction would depend on the Federal Reserve's guidance following the June 13-14 meeting. Nguyen suggested that the anticipation of rising rates could weigh on the gold price until the meeting takes place. However, if the Fed's interest rate decision aligns with the expectations of experts, a more significant and enduring correction in the market could occur, as the positioning of investors would be revealed as overly hawkish.
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