Federal Reserve Shoots down gold prices from intra-day high

Gold futures, based on the most active August contract, initially rallied but closed moderately higher at around $2,340, gaining $6.80 on the day. The surge followed the release of the May Consumer Price Index (CPI) report at 8 AM Eastern time, which showed no noticeable rise in inflation compared to the previous month. This marked the first month without an increase in core inflation levels since October 2023.

Gold prices spiked from approximately $2,330 at 8 AM to an intraday high of $2,358, nearly $30 above the opening price, within 90 minutes after the CPI data.

However, gold's gains were short-lived as the Federal Reserve's new dot plot projections revealed a close divide between two and one rate cuts for 2024, fewer than previously anticipated. The Summary of Economic Projections (SEP) showed a clear split among the 19 voting Federal Reserve board members, with some projecting the Fed funds rate to fall below 5% by year-end, implying one or two rate cuts, while others saw rates above 5%, suggesting no cuts or only one cut in 2024.

The Federal Reserve's statement was largely unchanged from its previous statement, except for omitting any mention of a decline in the pace of balance sheet reduction.

Following the Fed's projections, U.S. equities reached new all-time highs in the S&P 500 and NASDAQ indices, while the U.S. dollar index declined by 0.5%. Despite the dollar's decline, gold's rise was more subdued, signaling that sellers were in control of the market.

Throughout the remainder of the day, gold attempted to regain its earlier highs but failed to do so, ending the day nominally higher at $2,336.