Price Indicator

Fokus Emas :

1. Gold price weaken to the level of $2291 in this week (3/6-7/6)
2. America’s and Global Economic Outlook

Market Review

Gold prices weakened to $2291 compared to last week due to market uncertainty and volatility, although expectations of an interest rate cut by the US central bank followed by a cooling trend in the global economy and the level of gold demand which is still relatively high maintain gold prices.

Several macroeconomic data released by the Federal Reserve (Fed) around this week strengthened market expectations of an interest rate cut by the Fed. The Core Price Consumption Expenditure Index, which is the Federal Reserve's preferred inflation index, fell to 0.2%, down from 0.3% in the previous month. Meanwhile, the ISM Manufacturing PMI data contracted to 48.7 in May, lower than the estimate of 49.6. Moreover, the current US economic growth is slower due to lower consumer spending, which is expected to hold back inflation. These data increase the probability that the Fed will cut interest rates by the end of this year.

Currently, several world central banks are lowering interest rates which are intended to lower borrowing costs to support economic activity. This week, the Bank of Canada (BoC) cut its benchmark interest rate to 4.75% from 5.00%, and the European Central Bank (ECB) did the same, cutting its main interest rate by 0.25% to 4.25%. Following the release of lower inflation data in Switzerland, speculation has also increased that the Swiss National Bank (SNB) will cut its main interest rate in the near future.

The precious metal gold is also supported by stable commodity prices. Caixin PMI data also showed optimistic results from China, indicating that the Chinese economy, which is one of the largest consumers of gold, has the potential to continue to grow. Demand for gold is also still maintained after several countries in Asia used it as a hedge against currency depreciation. In addition, geopolitical risks stemming from the ongoing conflict in the Middle East. This tension is expected to remain the focus of market players, where if the tension increases, it is likely to increase the flow of safe-haven assets which have the potential to increase gold prices.

Market Overview

Global Economic Outlook

The US Bureau of Statistics report showed an increase in Average Hourly Earnings of 4.1% YoY. However, the Unemployment Rate rose to 4.0% from 3.9% previously. The data indicates wage inflation that could trigger higher core and headline inflation, potentially causing the US central bank to delay its interest rate cuts. High interest rates for a longer period are negative sentiment for gold because they increase the opportunity cost of holding non-yielding assets.

Nevertheless, the price of Gold is supported by different prospects for interest rate expectations at the global level. The Bank of Canada (BoC) cut its overnight interest rate by 0.25% to 4.75% last week, as did the European Central Bank (ECB). The release of lower inflation data in Switzerland has fueled speculation that the Swiss National Bank (SNB) could also cut interest rates in the near future.

The US temporary inflation report and the Consumer Price Index (CPI) data to be released in the near future will be important factors for gold prices. After that, the Fed, led by Chairman Jerome Powell, will release a monetary policy statement and Summary of Economic Projections (SEP) which also has the potential to provide an overview of the monetary policy that will be carried out by the Fed in the future.

Gold Demand

The People’s Bank of China (PBOC) report showed it stopped buying gold for its reserves in May, ending a buying spree that lasted for the past 18 months. The data follows strong buying in April that saw China’s gold reserves at the PBOC reach an all-time high of 4.9% of total reserves.

WEEKLY ECONOMIC DATA & EVENTS CALENDAR

Source: ICDX Research