By Joe Hoppe


Gold futures are trading in a narrow band, as markets adopt a wait-and-see approach ahead of Wednesday's rare joint offering of both U.S. inflation data and a Federal Reserve policy decision.

August gold futures on the New York Mercantile Exchange recently rose 0.1% to $2,329.5 a troy ounce, having failed to break out of a range of $2,327.2 to $2,334.5 this session. It has largely traded sideways since Friday's stronger-than-expected U.S. Nonfarm Payroll data dashed hopes for an interest rate cut any time soon, sparking a sell-off.

Interest rates are typically inversely related to gold prices, with higher rates damping the appeal of non-interest bearing bullion.

If Wednesday's Consumer Price Index data comes in softer than expected, it will be a boon for gold prices by improving the chances of a U.S. rate cut, Bas Kooijman, CEO and asset manager of investment manager DHF Capital.

On the flip-side, an upside reading in particular could trigger dollar volatility and further reduce rate-cut expectations, pushing gold down accordingly, said Ricardo Evangelista, senior analyst at ActivTrades.

The CPI--a measure of what Americans pay for goods and services--is expected to rise just 0.1% in May, the second consecutive month in which inflation has slowed, according to economists polled by the Wall Street Journal.

Later on Wednesday is the Fed decision. Analysts widely expect it will choose to keep interest rates within the 5.25%-5.5% target range first introduced last July, given inflation has proven stickier than expected over the first quarter of the year.

"[Our] U.S. rates strategy team expect the Fed to not only keep rates unchanged, but also to use nearly identical messaging to its last meeting," said RBC Capital Markets analysts in a note.

While U.S. inflation has moderated, price pressures remain high, especially in the services sector, said Henk Potts, market strategist at Barclays Private Bank. Barclays expects the Fed to cut rates by just a quarter point this year.


Write to Joe Hoppe at joseph.hoppe@wsj.com


(END) Dow Jones Newswires

06-12-24 0712ET