Gold Investors Eye Key Economic Indicators Amid Holiday-Shortened Week

As markets prepare for a truncated trading week due to the Independence Day holiday in the United States, gold investors are keenly focused on several crucial economic events that could influence the precious metal's price trajectory in the near term. With Canadian markets closed for Canada Day and U.S. markets set for early closure on Wednesday followed by a full day off on Thursday, attention is concentrated on three pivotal occurrences: Federal Reserve Chairman Jerome Powell's comments at an international conference on Tuesday, the release of last month's FOMC meeting minutes on Wednesday, and the U.S. nonfarm jobs report on Friday.

These events follow today's release of the Institute for Supply Management's June PMI data, which revealed a decline to 45.5, marking the third consecutive month of contraction in U.S. manufacturing. This report suggests a potential cooling of inflation, aligning with last week's PCE report that indicated a continued diminishment of inflationary pressures and a trajectory closer to the Fed's 2% target.

Market expectations, as reflected in the CME's FedWatch tool, now show a 91.2% probability that the Fed will maintain its current benchmark rates between 5.25% and 5.5% at the July FOMC meeting. However, the likelihood of a rate cut at the September FOMC meeting has increased to 65.3%, up from 62.4% on Friday and 45.8% just over a month ago.

This growing optimism for rate cuts by September has provided firm price support for gold, though significant price movements remain limited. Investors are eagerly anticipating Chairman Powell's speech and the FOMC meeting minutes for further insights into the Fed's monetary policy outlook. Subsequently, attention will shift to the jobs report later in the week, with market participants hoping to glean information about the timing and number of potential rate cuts this year.

As of 5:15 PM ET, gold futures for the most active August contract are priced at $2341.90, reflecting a daily gain of $5.00. The precious metal traded within a range of $2328.20 to $2348.80, opening in New York at $2336.20. The slight weakness in the U.S. dollar, with the index declining by 0.04% to 105.837, provided minimal tailwinds for gold prices.

In this climate of economic uncertainty and anticipation, gold investors remain vigilant, carefully analyzing each piece of data and commentary for clues about the future direction of interest rates and, consequently, the potential performance of the yellow metal in the coming months.

Wishing you as always good trading,