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Gold prices consolidating until another catalyst appears

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Gold prices dipped on Tuesday as investors cashed out profits following robust gains over the past weeks while the rising hopes of a trade deal being struck between China and the United States spurred risk sentiment.

Spot gold slipped 0.2% to 1,324.67 USD per ounce by 10:28 a.m. ET after the prices had hit a 14-month high of 1,348.08 USD on June 7. Meanwhile, the US gold futures were down by 0.1% to 1,328.50 USD per ounce.

gold price

The analysts do not expect a substantial retreat in gold and look for the yellow metal to consolidate until some new catalyst prompts the next move higher. Gold got a sharp boost last week from Federal Reserve Chair Jerome Powell’s apparent willingness to cut interest rates if necessary and from a softer US dollar and economic data, as well as a tumble in market-set interest rates.

Indeed, with Fed pricing suggesting a nearly 80% probability of interest-rate cuts in July, the market may be pricing too much dovishness too early. Any improvement in the economic data this week, particularly inflation or retail sales, could see a portion of the implied cut probabilities priced out.

The analysts see the yellow metal consolidating at these higher levels until another catalyst, such as additional equity weakness, prompts the next move higher.

With fears easing that the United States would impose trade tariffs with Mexico, investors are now optimistic that U.S. President Donald Trump could shelve threats to impose more tariffs on China as well. He is expected to meet with President Xi Jinping at a Group of 20 summit on June 28-29. The trade dispute between Beijing and Washington has toppled markets since its conception over a year ago, and raised concerns of a global economic slowdown, prompting central banks around the world to keep a hold on interest rates.

The US dollar held steady above a two-and-a-half-month low against a basket of currencies, after Mexico and the United States reached a trade deal. The outlook for the world economy has not changed and that leads us to believe that the upside is still intact, but the gold market needs weaker stocks and a weaker dollar to see that through.

Inflows into the world’s largest gold ETF, the SPDR Gold Trust, rose by 2%. That marked its biggest one-day gain since 2016.

The other precious metals did not resonate with bullion’s move, with silver up by 0.4% to 14.72 USD per ounce and platinum gaining 1.3% at 812.35 USD per ounce. Meanwhile, the palladium extended gains for a fourth straight session, climbing 0.8% to a six-week high at 1,393.65 USD per ounce.

Gold price analysis

Gold prices may be on “shaky ground” after running sharply higher last week, with the market vulnerable to back-and-forth moves based on whether global trade tensions are getting worse or easing, and with the market prone to profit-taking after a big run-up in bullish positioning in the futures market, said Commerzbank.

Spot metal fell back to 0.2% to 1,324.67 USD per ounce by 10:28 a.m. ET after it had traded just below 1,348 USD on Friday. The metal was not in demand at the start of the week after US President Donald Trump announced that he would not be introducing threatened tariffs on Mexico for now.

The most recent positioning data from the Commodity Futures Trading Commission showed that the net-bullish position of futures traders soared 96,182 contracts as of June 4 from 26,274 the prior week. That puts them at their highest level in over a year and makes gold susceptible to profit-taking.

After steady outflows throughout the first four months of the year, total known ETF (exchange-traded-fund) holdings of gold stabilized throughout May, with June so far seeing a reversal of the trend as holdings increased 1.4 million ounces, up 2% month to date.