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James Hyerczyk
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Comex Gold

Gold futures are edging lower on Wednesday despite the weaker U.S. Dollar and lower interest rates. The move suggests investor indecision and uncertainty ahead of Thursday’s U.S. consumer inflation report. The intraday fundamentals may not be driving prices higher, but they could be preventing an even bigger decline.

At 09:28 GMT, August Comex gold futures are trading $1890.10, down $4.30 or -0.23%.

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In addition to tomorrow’s U.S. consumer price index report, traders are also awaiting key monetary policy decisions from the European Central Bank (ECB) on Thursday and from the Federal Reserve on June 16.

Traders are also showing a muted reaction to inflation data out of China and comments about interest rates from U.S. Treasury Secretary Janet Yellen on Sunday.

US Consumer Inflation Outlook

This week’s trade has been a reflection of cautious sentiment ahead of the latest inflation data from the U.S, which could lead the Federal Reserve to taper asset purchases sooner rather than later.

The consumer price index (CPI) for May is set to be released. Economists are expecting the CPI to rise 4.7% from a year earlier, according to Dow Jones. In April, the CPI increased 4.2% on an annual basis, the fastest rise since 2008.

The Fed has previously contended that higher price pressures are just temporary as the economy continues to rebound from the pandemic-induced recession.

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Gold Traders Eyeing Thursday’s ECB Meeting

Besides the U.S. inflation report, gold traders will also be monitoring Thursday’s ECB meeting to gauge the pace of global recovery and policymakers’ thinking about paring back stimulus.

The ECB is expected to keep policy settings steady, but the Euro is likely to be sensitive to changes in the bank’s economic forecasts or any signal that the pace of bond buying could be reduced in months ahead.

China Producer Inflation Hits Multi-Year High

China’s May factory gate prices rose at their fastest annual pace in over 12 years due to surging commodity prices, highlighting global inflation pressures at a time when policymakers are trying to revitalize COVID-hit growth.

China’s producer price index (PPI) increased 9.0%, the National Bureau of Statistics (NBS) said on Wednesday, as prices bounced back from last year’s pandemic lows.

The PPI rise in May – the fastest on-year gain for any month since September 2008 – was driven by significant price increases in crude oil, iron ore and non-ferrous metals, the NBS said.

Analysts in a Reuters poll had expected the PPI to rise 8.5% after a 6.8% increase in April.

Yellen Speaks on Interest Rates

U.S. Treasury Secretary Janet Yellen on Sunday noted that a slightly higher interest-rate environment “would be a plus for society’s point of view and the Fed’s point of view.”

Daily Outlook

The low volume suggests a few of the major players are sitting on the sidelines ahead of Thursday’s U.S. CPI report and the ECB monetary policy decision.

We’re looking at a sideways trade with bullish investors increasingly worried pandemic-driven stimulus measures could supercharge global inflation, while bearish traders believe sharply higher inflation could force central banks to tighten policy, potentially curbing the recovery.

Until they work out that dilemma, the market is likely to remain rangebound with higher rates capping gains and high inflation putting in the floor.

For a look at all of today’s economic events, check out our economic calendar.
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