The U.S. Commerce Department announced Thursday that durable goods orders rose 0.3% in June, missing economist expectations of 1.6%, while spot gold traded at $4,087.17, remaining below the $4,100 level despite the weak manufacturing data. The subdued gold performance reflects conflicting market forces as the war in Iran has disrupted global energy markets, driving inflation pressures higher and pushing bond yields to decade-highs last week. Analysts note the Federal Reserve faces a precarious position, reluctant to raise interest rates in a slowing economy even as inflation pressures remain elevated, with markets pricing in a 33% chance of a rate hike this Wednesday.
Commerce Department Reports June Durable Goods Data
The Commerce Department announced Thursday that U.S. durable goods orders rose 0.3% in June, following May's revised drop of 4.0%. The consensus view of economists called for an increase of 1.6%. Core durable goods, which strip out the volatile transportation sector, rose 0.6% last month, missing consensus forecasts for a 0.9% reading.
Gold Trades at $4,087.17 Amid Weak Manufacturing Activity
Spot gold last traded at $4,087.17, up 0.80% on the day. The gold market has not seen any significant reaction to the disappointing economic data. Analysts note that weak manufacturing activity should provide some support for the precious metal, because the Federal Reserve will be reluctant to raise interest rates in a slowing economy, even if pressures remain elevated.
Gold has struggled in recent months as the war in Iran has significantly disrupted the global energy market, driving inflation pressures higher, pushing bond yields up and forcing central banks to adopt tightening biases. Real yields on long-term bonds hit decade-highs last week, raising the opportunity cost of holding gold, a non-yielding asset.
Markets Price 33% Rate Hike Probability This Wednesday
Markets are pricing in a 33% chance of a rate hike this Wednesday and see a roughly 80% chance of higher rates in September. Many analysts have said that the Federal Reserve can't afford to raise interest rates, as it could slow down the economy and have little impact on resolving the ongoing energy crisis.
FAQ
What were the U.S. durable goods numbers for June?
U.S. durable goods orders rose 0.3% in June, following May's revised drop of 4.0%. Core durable goods, which exclude transportation, rose 0.6% last month. Both figures missed economist expectations of 1.6% and 0.9% respectively.
Why is gold struggling despite weak manufacturing data?
Gold has struggled in recent months as the war in Iran has significantly disrupted the global energy market, driving inflation pressures higher and pushing bond yields up. Real yields on long-term bonds hit decade-highs last week, raising the opportunity cost of holding gold, a non-yielding asset.
What are the market expectations for Federal Reserve rate decisions?
Markets are pricing in a 33% chance of a rate hike this Wednesday and see a roughly 80% chance of higher rates in September. Analysts have said the Federal Reserve faces a precarious position between slowing economic activity and elevated inflation pressures.
