Gold futures are up Tuesday morning as US Treasury yields softened overnight and the US dollar retreated from a two-year high. Nonetheless, expectations of interest rate hikes in the US, Europe, Australia and New Zealand are dampening demand for bullion.
As of 09:21 GMT, August Comex gold futures are trading at $1850.40, up $6.70 or +0.36%. On Monday, the SPDR Gold Shares ETF (GLD) settled at $171.80, down $0.78 or -0.45%.
Global Rate Hike Expectations Weigh on Gold
Gold bulls fear higher interest rates as they reduce demand for the valuable non-interest-bearing, non-earning asset.
Overnight, the Reserve Bank of Australia (RBA) raised its benchmark interest rate. The Reserve Bank of New Zealand is also expected to raise its official exchange rate later in the month.
Additionally, the Federal Reserve is expected to raise its benchmark next week. On Thursday, the European Central Bank (ECB) is expected to outline its rate hike plans on Thursday.
Reserve Bank of Australia raises rates above market expectations
The Reserve Bank of Australia (RBA) raised interest rates the most in 22 years on Tuesday and signaled tightening ahead as it struggles to contain soaring inflation, stun markets and send bond yields skyrocketing.
Concluding its June policy meeting, the RBA raised its benchmark rate by 50 basis points to 0.85%, surprising investors who had bet on a move of 25 or 40 basis points.
Reserve Bank of New Zealand: should take a more aggressive tightening path
The Reserve Bank of New Zealand (RBNZ) made its fifth consecutive interest rate hike on May 24 and signaled a much more aggressive tightening path as authorities seek to reduce the second-round effects of the crisis. galloping inflation.
The RBNZ has raised the official cash rate by 50 basis points to 2.0%, a level not seen since November 2016. Basically, a hawkish RBNZ now expects the cash rate to double to 4.0% over the next next year and will remain there until 2024.
European Central Bank: rate hike expected in July
The European Central Bank (ECB) will probably decide on Thursday to end its stimulus program in July, and could announce an interest rate hike at the same time. In May, ECB President Christine Lagarde opened the door to a 50 basis point hike next month.
Federal Reserve: Traders bet on 50 basis point rate hikes in June and July
The US Federal Reserve is on track for half-point interest rate hikes in June and July. However, the strength of the economy and last week’s US jobs report boosted expectations of continued tightening from the US central bank.
Friday’s US consumer inflation (CPI) report should provide further clues to the pace of US rate hikes.
The CPI is expected to have gained 0.7% in May, from 0.3% in April, with annual inflation unchanged at 8.3%, according to the median estimate of economists polled by Reuters.
While some believe higher inflation would be bullish for gold prices, a jump in inflation in this report could actually be bearish for gold, as it could bolster expectations that the Fed will continue. to aggressively raise rates as it attempts to ease rising price pressures. at the fastest pace in 40 years.