Gold Prices Climb as U.S. Data Shows Weakness, Anticipated Fed Rate Cuts Ahead

On Monday, gold prices witnessed a significant increase in response to disappointing U.S. manufacturing figures. The subpar data fueled speculation that the Federal Reserve might slash interest rates later in the year. As a result, the U.S. dollar dipped to a three-week low while Treasury yields fell across various durations, dropping below their 50-day moving averages for the first time in two weeks.

Soft U.S. Economic Indicators Stoke Gold's Elevation

The manufacturing sector in the U.S. exhibited further downturn as evidenced by the May ISM Manufacturing Index, contributing to the bullish trend in gold prices. Additionally, April's U.S. construction spending unexpectedly declined for the second consecutive month due to reduced non-residential construction activity, which also supported the precious metal's ascent.

Comparative Rate Cuts and Gold's Outlook

Amid expectations of the Federal Reserve's rate cuts, the European Central Bank is also projected to lower its rates by 25 basis points to 3.75% on Thursday. Should the ECB move ahead with the cut, it will be the first major central bank to apply such measures in this cycle. Meanwhile, Comex gold for June delivery closed at $2,346.60 per ounce, marking a 1% increase. Similarly, June silver ended the day with a 1.1% gain at $30.641 per ounce.

Gold's Summer Projections: Stability Aided by Global Factors

Heading into the summer, TD Securities' head commodity strategist Bart Malek forecasts a steady support for gold. This prediction aligns with investors' expectations regarding future rate cuts by central banks and persistent demand from the Asian markets. Although inflation indicators favored by the Fed suggest a continuous downward trend, Malek pointed out that no significant rally in gold prices is anticipated shortly. Policymakers are currently seeking additional confirmation that their economic models align with reality and that current interest rates are effectively curbing inflation.

gold, rates, data