Gold prices moved higher on Tuesday as equities exhibited weakness following the World Bank’s warning about a sharp contraction of the global economy, and on caution ahead of the Federal Reserve’s monetary policy announcement, due on Wednesday.
The Fed is widely expected to be ultra-dovish despite a surprisingly strong employment report for the month of May. It will be a tough balancing job for the Fed to remain supportive as businesses reopen after months-long lockdown.
The central bank has mulled a negative-rate policy since late 2019 but doesn’t want to go in this direction.
Gold’s uptick was supported by a weaker dollar. The dollar index, which declined to 96.23, was last seen at 96.31, down 0.32% from previous close.
Gold futures ended up $16.80 or about 1% at $1,721.90 an ounce.
Silver futures for July ended lower by $0.099 or 0.6% at $17.794 an ounce, while Copper futures for July settled higher by $0.0335 or 1.3% at $2.5990 per pound.
The World Bank, in its latest Global Economic Prospects, has warned the global economy will shrink by 5.2% this year, representing the deepest recession since the Second World War.
Economic activity in advanced economies is anticipated to contract 7% in 2020 as domestic demand and supply, trade, and finance have been severely disrupted, the World Bank Group said in its latest report. The U.S. economy is projected to shrink by 6.1% this year, while the euro area is likely to see a 9.1% contraction.
In U.S. economic news, a report from the Commerce Department said wholesale inventories in the U.S. increased by slightly less than expected in the month of April.
The report said wholesale inventories rose by 0.3% in the month after tumbling by a revised 1.1% in March. Economists had expected wholesale inventories to rise by 0.4% compared to the 0.8% slump originally reported for the previous month.
The material has been provided by InstaForex Company – www.instaforex.com