Gold is just taking a break as interest rate expectations continue to shift
- With the weekend upon us, investors can close the book on a challenging and volatile month for the gold market.
We have seen this pattern repeatedly in the last 12 months. As weak economic data ignites new recession fears, markets start to front-run the Federal Reserve pricing in rate cuts. At the start of the month, markets saw a nearly 17% chance of a rate cut in June. At the same time, markets saw interest rates roughly 100 basis points lower by the end of the year.
This new shift in interest rate expectations is creating a challenging environment for gold because it is supporting the U.S. dollar, which is trading at a three-month high. To top it all off, the summer is traditionally a weak seasonal time for the precious metal. “Gold's 'historical position' continues to be the top reason for central banks to hold gold, with 77% of respondents saying that it is highly relevant or somewhat relevant," the survey said.
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