Gold’s Rally: A Quick Resurgence Above $2,325
Gold (XAU/USD) has nudged higher after a tumble to roughly $2,315 on Monday, now hovering around $2,325. The surge comes as the U.S. dollar takes a hit, with the DXY sliding to 105.60 points amid softening inflation chatter.
What’s Fueling the Dollar’s Decline?
- Consumer Price Index (CPI) – May’s report exceeded expectations, showing a sharper drop in price pressure.
- Global Purchasing Managers’ Index (PMI) – June’s preliminary figures suggest a modest slowdown in growth, with sales price inflation hitting a five‑month low.
- Services and manufacturing sectors saw their weakest rise in four and six months respectively.
The data paints a picture that the Federal Reserve might start loosening policy at the September meeting, with ripple cuts possibly in November or December. Today, the 30‑day federal‑fund futures suggest a 66% probability of a rate cut in September.
Fed’s Likely Playbook
While the Fed could cut rates once this year, there’s a strong chance they’ll wait until next year—waiting for inflation to settle for a stretch before sliding rates. That cautious stance explains why gold’s bounce wasn’t more dramatic.
Gold’s Reaction to PMI Surges
Despite the CMIB’s unexpected optimism, gold faced fierce selling pressure as the dollar rallied. The bright PMI signal made foreign currency holders wary of paying more for gold, squeezing prices.
Economic Momentum – The Big Picture
With the composite PMI at 51.7, the economy appears to be expanding at an annual growth rate of just under 2.5%. Services are the main driver, while manufacturing rebounces as part of the strongest two‑year roll‑out seen since 2024.
What Investors Are Watching Now
- First‑quarter GDP data due this week.
- Core Personal Consumption Expenditures (PCE) Price Index for May – the Fed’s go‑to inflation gauge.
These releases will send ripples through the market, indicating when and how much interest rates might be trimmed.
Geopolitical Sparks & Gold
In a twist, the newly inked security pact between Russia’s Vladimir Putin and North Korea’s Kim Jong Un adds a layer of tension, pledging military backup should either side be attacked. Coupled with rumors of a potential Israeli move in southern Lebanon, global volatility could dampen gold’s downward trend.
Ultimately, the U.S. Dollar Index and domestic economic indicators will keep gold’s long‑term journey tug‑ged by.
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