Gold dips on Pre-Fed Speculation

By Barani Krishnan

Investing.com - Fed cut or no cut?

Speculation on which way the Federal Reserve will lean on its rate policy come July 31 weighed on gold prices on Monday, with almost as many traders appearing to bet the central bank might not immediately pull the trigger on easing as opposed to those wagering on a rate cut.

Both bullion and futures of gold dipped as the surprisingly strong U.S. jobs report for June kept the market in suspense on whether $1,400 pricing will become the norm again or if support for $1,300 will continue to chip away.

Spot gold, reflective of trades in bullion, traded at $1,397.67 per ounce by 2:43 PM ET (18:43 GMT), down $1.30, or 0.1%, on the day. The session high was $1,407.66.

Gold futures for August delivery, traded on the Comex division of the New York Mercantile Exchange, settled Monday’s trade down just a dime at $1,400.

A slew of speeches by the Fed’s top officials this week is expected to feed gold traders’ obsession for a rate cut. There are as many as 10 scheduled speeches by central bankers, including Fed Chair Jerome Powell, who’ll be delivering two days of testimony to House and Senate panels. The Fed’s June meeting minutes are also due on Wednesday.

Investing.com's Fed Rate Monitor Tool still suggests a 100% chance the Fed will cut its key federal funds rate from 2.25%-2.5% to 2%-2.25% in July. Powell also said in a recent speech “an ounce of prevention is worth more than a pound of cure,” a hint that the central bank might lean toward a so-called insurance cut to head off a potential economic slowdown.

Yet, some market participants have scaled back expectations that a July cut is almost a certainty after the Labor Department that non-farm payroll employment grew 224,000 in June, a signal the economy may be too strong to justify an easing. The forecast jobs expansion had been only 160,000.

Other Fed bankers lined up to speak this week are New York Fed President John Williams (NYSE:WMB), St Louis Fed president James Bullard, Fed Atlanta President Raphael Bostic, Fed Vice Chair for Supervision Randal Quarles, Richmond Fed President Thomas Barkin and Minneapolis Fed President Neel Kashkari.

Of these, the most closely watched will be Bullard, who was the only dissenting voice at the June 18-19 Fed meeting, when the central bank decided to hold rates. Bullard is one of the more dovish members of the central bank’s policy-setting Federal Market Open Committee, or FOMC, and voted for a rate cut.

The Fed’s June minutes will also be closely perused for precise reasons on the FOMC’s decision to hold its federal funds rate steady in June.

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