Gold Price News: Gold Treads Water as Central Banks Signal Support

After an initial early surge in Monday trading, gold has become somewhat rangebound in more recent trading, largely confined to $2310-$2330/toz. The 50-day simple moving average is now in decline, moving below $2344/toz. Today’s early trading sees gold at $2330/toz.

Incoming economic data pertinent to gold has been mixed; while US Retail Sales for May disappointed, US Industrial Production for the same month was stronger. Meanwhile, the Euro Zone’s ZEW Economic Sentiment Index for June significantly exceeded expectations, despite weakness in Germany. However, this was largely driven by future expectations, with the current conditions component stalling at recessionary levels.

After Friday’s big move, US interest rate indicators have been relatively stable thus far this week. Both 2-Year and 10-Year US Treasuries Yields are trading marginally lower around 11-week lows, while the US Dollar is flat, despite political risk arising from upcoming French parliamentary elections. Fed fund futures also remain stable, pricing in a high probability of two rate cuts in 2024 vs. one in the Fed’s ‘dot plot’. This is both gold and silver supportive.

More significantly, the 2024 Central Bank Gold Reserves Survey (CBGR) just published by the World Gold Council, suggests that central banks’ support of gold is set to continue, despite China’s May pause. On a 12-month horizon, 29% of respondents expected to purchase gold, while 81% expected t gold reserves to rise. Over the medium term, the CBGR revealed that 62% of respondents thought US dollars would be a smaller proportion of reserves in five years’ time, while 69% thought the corresponding share of gold would increase.

Upcoming events in the market calendar includes UK May inflation data and Bank of Canada minutes later today and a Bank of England UK interest rate decision and US Initial Jobless Claims on Thursday.