Gold sees modest gain as investors await further Fed cues

Gold prices ticked higher on Tuesday amid light market conditions as investors await upcoming cues from the Federal Reserve. Bullion prices found some relief over the past two sessions following lower-than-expected readings on the Fed’s preferred inflation gauge for May. However, the central bank is still expected to proceed with rate hikes in July.

In addition to the inflation data, substantially weaker-than-expected U.S. manufacturing data also heightened fears of slowing economic growth, prompting some flows into gold.

Despite the recent gains, gold was still trading close to its weakest level in nearly four months. At the time of writing, spot gold remained flat at $1,927.95 an ounce, while gold futures steadied at $1,930.42 an ounce.

This week, further movements in the gold market are anticipated, particularly with the release of the minutes from the Federal Reserve’s June meeting scheduled for Wednesday. While the central bank decided to keep rates steady during the meeting, it also indicated the possibility of at least two more rate hikes this year.

Rising interest rates generally have a negative impact on gold since they increase the opportunity cost of holding the yellow metal. The forthcoming nonfarm payrolls data for June, which is due on Friday, is expected to play a role in the Federal Reserve’s decision on interest rates later in the month.

Market participants are currently pricing in an 88% chance of a 25 basis points rate increase by the Fed in July, given that inflation continues to trend above the central bank’s target range. The prospect of higher rates has weighed heavily on gold over the past two months and is expected to limit any significant recovery any time soon.