Gold Prices Surge Amid Signs of U.S. Economic Slowdown
Yesterday, gold prices increased by 1.19%, settling at 72,586 per 10 grams, as signs of an economic slowdown in the U.S. bolstered expectations for Federal Reserve interest rate cuts this year.
Despite a stable labor market indicated by falling jobless claims, single-family homebuilding dropped by 5.2% in May, pointing towards potential economic cooling. New York Fed President John Williams suggested that interest rates would gradually decrease, though he did not specify a timeline. Market sentiment reflects a 67% probability of a rate cut in September, according to the CME FedWatch Tool.
The Federal Reserve is cautiously optimistic about recent inflation data, looking for further signs of cooling and monitoring the strong labor market closely. In terms of gold imports, China saw a 38% decrease via Hong Kong in April, with net imports falling to 34.6 metric tons from 55.8 tons in March. This contrasts with high first-quarter consumption, which rose by 5.94% year-on-year to 308.91 metric tons. In India, gold demand remained low due to the absence of major festivals, resulting in discounts of up to $10 per ounce over official domestic prices. Chinese premiums also decreased, ranging from $18 to $26 per ounce compared to the previous week’s $27 to $32. Additionally, China’s central bank paused its gold purchases in May after 18 consecutive months of buying.
Technically, the gold market is experiencing fresh buying, with a 5.62% increase in open interest to 15,377 contracts as prices rose by 854 rupees. Gold currently has support at 71,980, with a potential test of 71,370 levels if breached. Resistance is anticipated at 73,025, with further gains possibly pushing prices to 73,460.
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