Gold trades in a narrow range on Wednesday, pressured by stronger dollar due to reduced expectations for an aggressive rate cut following strong US jobs data while yellow metal continues to look for directions ahead of Fed Chair Jerome Powell’s testimony as well as Fed minutes from its June meeting due to be released later today. White House economic advisor Larry Kudlow said US and Chinese officials had constructive phone talks on Tuesday while adding they were hoping to resume negotiations from where it was left. In addition to this, US Department of Commerce said it would provide licence to those US companies seeking to sell equipments to Chinese tech company Huawei if it did not pose threat to national security. On the other hand, daha showed today consumer inflation in China stayed at 15-month high in June while producer prices did not change.
Pressured by stronger dollar and rising bond yields due to reduced expectations for an aggressive rate cut by Fed following strong US jobs data, gold prices continued to stay in a narrow range on Wednesday ahead of Fed Chair Jerome Powell’s testimony before Congress and Fed minutes from its last policy meeting due to be released later today.
As of 13:16 GMT+3, spot gold was trading at $1,395.55 an ounce while dollar index was at 97.40. US 10-year Treasury yield increased to 2.103.
IG Asia strategist Jingyi Pan said on Bloomberg that Powell could be less dovish due to strong US jobs data and this could pressure gold in the short run while adding Fed’s support for gold was expected to continue in the long run.
Fed Chair Jerome Powell will be speaking before Congress later today and tomorrow. While 50 basis point rate cut hopes were dashed following latest US jobs report, the markets are still pricing 25 basis point cut at the end of July. Despite this, it is still possible for Fed to keep the rates on hold in July. Cleveland Fed President Patrick Harker said there was no immediate need to change interest rates and a rate cut would be warranted if the US economy was weakening substantially, which he said was not the case currently.
White House economic advisor Larry Kudlow said US and Chinese officials had constructive phone talks on Tuesday while adding they hoped to resume talks from where it was left. Sources said on Reuters that there were no sign of resolving current disagreements even though the talks resumed. Moreover, it is still uncertain whether the talks would resume from the draft agreed on before the talks broke down or from scratch.
On the other hand, US Commerce Secretary Wilbur Ross said on Tuesday that US Department of Commerce would give licence to those US companies seeking to sell equipments to Chinese tech company Huawei but added Huawei was still in their blacklist and licence would be given if there was no threat to national security.
According to data released in China today, consumer inflation stayed at 2.7% which is 15-year high while producer prices did not change. This is expected to weigh on consumption in China where domestic demand has been weakening due to slowing economy while it was stated that no change in producer prices was due to reducing energy prices as well as weak manufacturing sector.