Possible rate cuts, U.S. inflation decline holding gold prices down
ALBWABA – Gold prices declined early on Tuesday by 0.38 percent to $2,007.03, according to Goldprice.org, as oil prices rose late on Monday, Reuters reported.
Earlier gold trading on Tuesday saw the gold dropping by 0.2 percent and 0.1 percent on the ounce for spot and futures gold contracts, respectively, before picking up slightly within the hour.
Meanwhile, Brent crude futures rose $1.06, or 1.4 percent, to settle at $75.23 a barrel. West Texas Intermediate (WTI) crude also increased by $1.07, or 1.5 percent, settling at $71.11 a barrel.
Production cuts by OPEC+ countries and wildfires in Canada, combined with news about the United States (U.S.) resuming oil purchases for strategic reserves, bolstered oil prices, according to Reuters.
U.S. interest rates, inflation data, debt ceiling crisis wreak havoc on gold, oil prices
The U.S. Federal Reserve Board (the Fed) continues to push back on rate cuts this year.
According to Matt Simpson, a senior market analyst at City Index, this is putting pressure on gold prices, as reported by CNBC.
Earlier in May, U.S. inflation data showed consumer price inflation rates declining, as of April 2023.
This unexpected decline also anchored gold prices as buyers and investors hold their breath for future interest rate cuts by the Fed.
The Fed has increased interest rates by nearly five whole points in just a little over a year.
Recent statements by Fed officials were hopeful that the U.S. economy will see interest rate cuts later this year, in September.
In the meantime, global markets are anticipating the outcomes of the ongoing U.S. debt ceiling crisis.
Congress and the government are battling over whether or not to raise the debt ceiling. The government is on a deadline to pay its bills by June 1.
The government may be able to wiggle its way into a two-week grace period, U.S. officials claim. But failing to make the payments by then would have catastrophic repercussions on the American and global economies.
