By Barani Krishnan
Investing.com - Mixed U.S. economic data is giving profit-takers an opportunity to cash out of the rally before the market possibly rises again ahead of the Fed meeting.
Above-forecast U.S. industrial output data and upbeat retail sales and consumer confidence readings on Friday pushed back futures markets expectations of any quick rate cut by the U.S. Federal Reserve.
Yet, Monday’s slump of the Empire State manufacturing index into negative territory after posting its largest drop ever gave renewed hope to gold bugs that an easing might be indicated by the Fed after all its policy statement due Wednesday after its monthly meeting.
Lower interest rates make safe-haven assets such as gold, which does not yield interest, more attractive while weighing on the dollar. The US Dollar Index, measured against a basket of six currencies, was little changed on Monday at 97.04.
Spot gold, reflective of trades in bullion, traded at $1,339.12 per ounce by 2:48PM ET (18:48 GMT), down $2.45, or 0.2%, on the day.
Gold futures for August delivery, traded on the Comex division of the New York Mercantile Exchange, settled down $1.60, or 0.1%, at $1,342.90 per ounce.
Bullion hit 16-month highs of $1,358.13 last week, while Comex gold raced to 13-month peaks of $1,361.95.
“Gold pulls back ahead of the Fed meeting, as usual,” George Gero, precious metals analyst at RBC Wealth Management in New York,said, putting it to down to profit-taking after the yellow metal’s near 3% rally for June until last week.
Expectations of a rate cut at the Fed’s June 18-19 meeting fell to 21.7% from 28.3% on Thursday after the retail data released Friday. But bets for monetary easing at the July meeting remained at 85% after Monday’s Empire State data.
“No one is seriously expecting the Fed to loosen its belt at this (June) meeting, despite the weakness in core consumer prices in May,” said Fawad Razaqzada, analyst at FOREX.com in London. “However, what we and most other analysts expect is that the Fed will probably use this meeting to prepare the markets for a potential trim in the July and possibly September and/or December meetings.”