Gold resilient despite Fed’s rate hike expectation, solid US data

Despite growing speculations about the Fed raising interest rates in the future, the price of gold is rising back above $1900. The precious metal is trading at 1906.70 at the time of typing.

Strong growth is highlighted by the US economic data, which has caused the Gold Index to test the 200-day EMA. Rising Treasury bond yields support predictions of higher rates and potential hindrances to the demand for gold.

After falling below $1900 for the first time since March 15, 2023, the price of gold recovers some ground and rises by about 0.09% as a result of encouraging US economic data and growing expectations that the Federal Reserve would continue raising interest rates.

The data also provided evidence against “hard landing” predictions, with the economy growing at a rapid rate. After falling to a daily low of $1893.17, the XAU/USD is currently trading at $1909.65. US economic figures suggest that the Fed will tighten more.

Outstanding data for the US economy were provided by the US economic calendar. The first quarter’s Gross Domestic Product (GDP) was revised up from 1.3% to 2%, and the strength of the labour market was evident in the jobs numbers. Initial Jobless Claims for the week ending June 24 were 239K, far lower than forecasts of 265K, ending three weeks in a row in which readings exceeded the 260K threshold.

The data shows how well-off the US economy is. Following the release of the data, gold dealers and other market participants started to factor in any extra tightening that the US Federal Reserve (Fed), which is expected to raise interest rates by a quarter of a percentage point in July, would need to do. The probabilities of a 0.25% increase are 87% according to the CME FedWatch Tool, and the US Treasury

The US 10-year Treasury note yield has risen to 3.854%, a gain of 14.4 basis points, while US real yields, a headwind for XAU/USD prices, is at 1.678%, its highest level since March 9.

Other data showed that Pending Home Sales plunged to a five-month low in May, coming at -22.2% YoY, worst than April’s -20% contraction.

Earlier, the US Federal Reserve Chair Jerome Powell said the labor market remains tight, inflation too high, and expressed the Fed’s “long way to go” before inflation gets back to its 2% goal. Powell noted the majority of the Federal Reserve Open Market Committee (FOMC) expects “two or more” interest rate increases by the end of the year.

Bloomberg quotes analysts who say that “today’s data showed that rates will be higher for longer.” The 2-year US Treasury bond yield, which is most affected by changes in monetary policy, increased to 4.893%. As traders start to expect the Fed will keep raising borrowing costs, as highlighted in the most recent dot-plot graph, money market futures for the November meeting showed odds at 34% for a rate increase to the range of 5.50%-5.75%.


In light of this, the forecast for XAU/USD is somewhat skewed to the downside, but Gold bulls bought the dip at the 200-day EMA, or $1895.86. However, additional encouraging US data showing a robust economy could point to higher rates, which would result in less demand for the precious metal.