Gold Price News: Gold Recovers as Investors Defy the ‘Dot Plot’

Gold unexpectedly surged on Friday, gaining almost $30 an ounce to close above $2330 an ounce and a weekly gain of $37 per ounce (+1.6%). While this move has taken gold back above resistance at $2312, it remains challenged by a flattening 50-day simple moving average at $2345. Today’s early trading has seen gold decline towards $2317.

Friday’s move is particularly worthy of comment as it appears anomalous when framed against incoming data.

It is certainly the case that both the US May Import Prices and US June Michigan Consumer Sentiment prints on Friday came in below expectations and are somewhat gold-supportive. However, both are, at best, secondary drivers for gold investors. Indeed, the Michigan survey also highlighted consumers’ continued expectation of long-term inflation above the Fed’s target and the Cleveland Fed’s updated nowcast for core PCE inflation remains stuck at 2.6%.

Despite this absence of key data, Friday saw a very big shift in Fed Fund Futures, which was ultimately the primary gold price driver. These are now pricing in just a one in three chance that rates will remain on hold at the FOMC 18 September meeting and a 70% chance (from just 30% on Thursday) that rates will be cut twice by December. This is a massive investor rejection of the Fed’s ‘one and done dot plot’. It remains to be seen how this disparity will be resolved.

The market calendar for the early part of this week includes the May US Retail Sales and US Industrial Production data on Tuesday, which are likely to be of interest to gold investors.