Stronger dollar pushes gold away from all-time highs – Raw Materials

Gold prices continue to appreciate this Monday, albeit more tenuously, after reaching historic highs during the morning at $2,265.73 per ounce. Gold added 0.41% to $2,239 per ounce.

The prospects that the US Federal Reserve will be closer to cutting interest rates for the first time in June were boosting the precious metal. Traders put the possibility of a cut in the sixth month of the year at 63%, according to Reuters.

However, the March figures for industrial production in the United States, released this Monday, which show an increase for the first time since September 2022 – driven by an increase in orders and production volumes – once again cast doubts regarding the “timing” of interest rate cuts by the Fed, which is, in turn, boosting the dollar.

The Bloomberg dollar index – which measures the strength of the US currency against 10 rival currencies – added 0.55% to 105.06 dollars, the highest value since November 13.

The appreciation of the “green note” makes the purchase of gold more expensive for buyers in foreign currency, since the metal is priced in dollars. “I don’t believe that [os números da produção industrial]along with Friday’s PCE indicator data, materially change the Federal Reserve’s accounts, but markets are starting to align a little more with the Fed’s own expectations for how often and when they will hold interest rate cuts this year,” Helen Given, currency trader at Monex USA, told Reuters.

The precious metal has benefited from a series of developments in recent months. In March alone it gained more than 9%, supported by prospects of an easing of monetary policy carried out by central banks and a worsening of geopolitical tensions in the Middle East and Ukraine, as well as a reinforcement of reserves by central banks, especially in China, where consumers have also invested more in raw materials.

The latest catalyst was the household consumption expenditure price index (PCE), released last Friday. The indicator accelerated slightly to 2.5% compared to February of the previous year and, in monthly terms, the increase was 0.3%, below the 0.4% in January. In both cases, it remained in line with market expectations.

The president of the Fed, Jerome Powell, in reaction to these numbers, said that the indicator was “in line with the expectations” of the monetary authority and, despite having signaled that the relief in inflation is not yet enough to cut interest rates, optimism remained yourself.