Gold prices have risen for a second consecutive session, supported by softer-than-expected US producer price data, which has put downward pressure on both the US dollar and Treasury yields [1]. This data has led to a significant reduction in market expectations for near-term Federal Reserve tightening, with the probability of a July rate hike now at only 12%, compared to almost 31% a week ago [1]. According to ING strategists Warren Patterson and Ewa Manthey, these lower rate expectations are providing support for gold [1].
Despite this positive momentum, ING cautions that the upside for gold may be limited in the near term. Ongoing tensions in the Middle East and elevated energy prices could continue to support inflation risks, potentially capping further gains in gold prices [1]. Lower energy costs have helped ease inflation pressures, but persistent geopolitical risks and high energy prices remain a concern for the outlook [1].
No specific analyst forecasts or forward-looking price targets were provided beyond the caution that upside could be limited if current energy and geopolitical risks persist [1].
CONCLUSION
Gold is benefiting from reduced expectations of a Federal Reserve rate hike, but ongoing energy and geopolitical risks may limit further gains. Market sentiment is cautiously positive, with the outlook dependent on developments in inflation and global tensions.