On Tuesday (May 16th), the trading day for gold futures opened at $2015.19 per ounce. It reached a high of $2018.69 per ounce and a low of $2013.56 per ounce. As of the time of writing, it was trading at $2015.46 per ounce, down 0.04%.
The retreat of the US dollar from its five-week high earlier on Monday was attributed to investors’ cautiousness regarding the deadlock over the US debt ceiling. This, in turn, was seen as a key factor supporting gold prices denominated in dollars. It is worth mentioning that US President Biden expressed his expectation to meet with congressional leaders on Tuesday to discuss plans to raise the debt ceiling and avoid a catastrophic default. This, in turn, prompted some profit-taking by dollar bulls after two strong trading sessions.
The latest speculation about the Federal Reserve maintaining its hawkish stance has triggered another round of increase in US Treasury yields, which should be a tailwind for the US dollar and limit further upside in non-yielding gold prices. However, the complex fundamental backdrop mentioned above has kept bullish traders cautious before positioning for further intraday appreciation.
Federal Reserve Governor Jefferson described the progress in core inflation as “disappointing.” It is expected that consumer spending growth will slow down by the end of the year. The full impact of rapid interest rate hikes may be imminent. St. Louis Fed President Brad stated that current policy is at the lower end of a sufficiently restrictive level. Chicago Fed President Gulbis mentioned that inflation rates are still elevated but at least declining. Federal Reserve Governor Bowman believes that inflation rates are still elevated. If inflation remains high and the labor market remains tight, further rate hikes “might be appropriate.”
