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Gold drops as investors await U.S. data, Fed policy

Gold prices

Spot gold was 0.5% lower at $2,299.68 per ounce, and U.S. gold futures dropped 0.4% to $2,316.70

Gold prices dropped on Tuesday with investors awaiting a key U.S. inflation data and the Fed’s policy announcement for hints on when the central bank will start cutting interest rates.

Spot gold was 0.5% lower at $2,299.68 per ounce, as of 0558 GMT. U.S. gold futures dropped 0.4% to $2,316.70.

I suspect the Fed’s hands are tied following the strong payrolls report, as it likely does not enable them to signal the September cut that traders desperately want to hear. And that could see gold take another dent or two amid increasing yields and the U.S. dollar, according to City Index senior analyst Matt Simpson.

The May CPI inflation report due on Wednesday will be the next major data point along with the Federal Reserve concluding its two-day meeting on the same day.

The fact that we’ll see inflation data just hours ahead of the Fed’s interest rate decision means we might see a last-minute panic and higher levels of volatility should inflation come in hot, Simpson added.

Updated economic projections from Fed officials this week are expected to show fewer interest rate cuts than policymakers expected three months ago amid unexpectedly sticky inflation.

The strong U.S. jobs data and reports that China’s central bank was holding off gold purchases sent bullion down nearly 3.5%, or $83, on Friday in its biggest daily decline since November 2020.

China, the biggest official sector buyer of gold, is expected to resume its bullion shopping spree once prices drop from the record highs reached in May.

Among other metals, spot silver dropped 2.2% to $29.13 per ounce, platinum was 0.9% lower at $958.55 and palladium shed 1% to $895.13.

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