Gold, Crude Oil, Copper Forecast: Markets Recalibrating After FOMC Week

Gold’s FOMC-induced drop appears to be moderating after the yellow metal rebounded to start the week. XAU/USD moved higher from the 1761 level hit late last week, aided by a slightly weaker US Dollar. The June FOMC policy decision hammered precious metals prices last week when the Federal Open Market Committee (FOMC) shifted its timeline up to pull back the super-easy policy markets have enjoyed.

The updated Summary of Economic Projections (SEP) showed that 13 Federal Reserve board members see at least one rate hike by 2023, up from seven in the last SEP. Rising consumer prices are responsible for a large part of the shift in the Fed’s outlook, with the latest data showing a 5.0% increase over the last 12 months, according to the Bureau of Labor Statistics.

That said, investors will be keenly focused on inflation data in an attempt to forecast the Fed’s next move. Higher than expected figures will likely only bolster rate hike bets, while weaker data should bring a less hawkish view. This week will bring consumer price expenditures for May across the wires, with analysts expecting core prices – the Fed’s preferred inflation metric – to rise 3.4% on a year-over-year basis.

GOLD DAILY CHART

gold

Chart created with TradingView

Crude oil prices are also gaining, with a weaker US Dollar and stalled talks between Iran and the United States helping to boost the energy prices higher. Ongoing vaccination rollouts across major economies are also helping to strengthen the growth rebound narrative, and while variant Covid strains are causing concern among government leaders, no broad-based lockdowns are expected as of now.

Negotiations between the United States and Iran stalled over the weekend after Ebrahim Raisi secured Iran’s presidential nomination. The hardliner former judge sent a negative signal to the oil market’s supply outlook as markets see the shift in Iran’s political climate working against the two countries reaching a deal to lift sanctions and return Iran’s oil supply to global markets.

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