Gold prices rose on Wednesday (July 10) as Federal Reserve Chair Jerome Powell continued to fuel expectations of an upcoming rate cut. However, gold’s gains were limited as investors awaited the release of key US inflation data to gauge the likelihood of a rate change.
A recently published report predicts that gold prices could reach $2,600 per ounce this year and surpass $3,000 per ounce by 2025.
At the close of New York trading, gold futures were up $6.70, or nearly 0.3%, to $2,371.70 per ounce, according to data from Kitco.
As of 9 a.m. Vietnamese time on Thursday (July 11), gold in the Asian market was up $2.50 from the previous session, or 0.11%, to $2,374.20 per ounce. This price translates to approximately 72.8 million VND per tael if converted using Vietcombank’s selling exchange rate, an increase of 200,000 VND from the previous day.
Gold’s rise was supported by a weaker US dollar and lower US Treasury yields following Powell’s second testimony before Congress.
“Powell didn’t deliver any unexpected hawkish signals in his testimony, reassuring markets that the Fed will cut rates this year,” said Jim Wyckoff, senior analyst at Kitco News.
Testifying before the House Financial Services Committee on Wednesday, Powell stated that he was not ready to declare victory over inflation but that the US economy was on track to achieving price stability and maintaining a low unemployment rate. Powell also mentioned that the Fed was “very focused on keeping that going.”
On Tuesday, Powell told the Senate Banking Committee that the US economy was no longer overheating and that the Fed had to balance between opposing risks. He also indicated that a rate cut could be implemented if inflation made further progress.
According to the FedWatch Tool from CME, traders are betting on a 70% chance of the Fed lowering rates by September and a 46% chance of a second cut by December.
The US Dollar Index, a measure of the dollar’s strength, dipped slightly on Wednesday, falling below 105 points. Meanwhile, the yield on the 10-year US Treasury note fell 1.8 basis points to 4.282%.
Following Powell’s testimonies, market attention now shifts to upcoming inflation reports from the US Labor Department, including the Consumer Price Index (CPI) for June, expected on Thursday, and the Producer Price Index (PPI) on Friday.
According to a Dow Jones poll, economists forecast a 0.1% month-over-month rise in the US CPI for June and a 3.1% year-over-year increase. For the core CPI, which excludes volatile food and energy prices, a 0.2% monthly gain and a 3.4% annual increase are expected.
“If the data aligns with expectations, indicating that inflation continues to ease, precious metals prices will likely continue to trade in a narrow range with a positive bias,” Wyckoff stated.
In a July 10 report, Citigroup forecasted that global gold demand would remain robust in the second half of the year, pushing prices to $2,600 per ounce. In addition to investor demand, Citigroup analysts attributed this prediction to expectations of record gold purchases by central banks.
The bank’s model predicts that central banks will buy approximately 1,100 tons of gold this year, a 5.85% increase from 2023. In an optimistic scenario, central bank gold purchases could even surpass 1,250 tons in 2024.
Citigroup’s forecast comes despite recent data from China suggesting that the People’s Bank of China (PBOC) refrained from net gold purchases for the second consecutive month in June.
Nonetheless, the report highlights that central bank gold demand has been stable at around 28-30% of global gold mine production since 2022, a record level. Citigroup analysts even contemplate a scenario where central bank gold demand could reach 35% of global mine production in 2025 due to the impact of trade wars and concerns over US fiscal policy.
Additionally, Citigroup anticipates that consumer and investor demand for gold worldwide will continue to grow.
“We remain optimistic about physical gold demand over the next 12 months, with the Fed starting to cut rates and the US job market weakening,” the report stated.
In this environment, Citigroup projects gold prices to reach the $2,800-$3,000 per ounce range by mid-2025.
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