Investing.com – Weaker economic data and a stronger dollar battled for the hearts and minds of gold traders on Tuesday as an absence of guidance from the Federal Reserve inhibited sharp moves in the precious metal ahead of a widely expected rate cut.
Spot gold, reflective of trades in bullion, traded at $1,419.74 per ounce by 2:33 PM ET (18:33 GMT), down $4.87, or 0.3%, on the day.
Gold futures for August delivery, traded on the Comex division of the New York Mercantile Exchange, settled down $5.20, or 0.4%, at $1,421.70.
Gold hit session highs after a slide in both existing U.S. home sales in June and a regional manufacturing index for the Richmond area in July that underpinned Fed rate cut expectations.
But the knee-jerk reaction quickly faded as the dollar rallied on the back of an agreement between U.S. President Donald Trump and Congressional leaders over the debt ceiling.
The bipartisan deal, pending approval by both chambers of Congress, would pave the way for more government spending through at least 2021 and avoid the threat of a government shutdown in that timeframe.
The dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, gained 0.5% to 97.39 by 2:25 PM ET (18:25 GMT).
A stronger greenback is normally detrimental to the dollar-denominated metal, which becomes more expensive for holders of foreign currencies.
After weeks of providing hints on where interest rates might go, the Fed, as well as the European Central Bank, are both resisting making statements ahead of upcoming monetary policy decisions. The information blackout practically leaves gold investors, who plowed headlong into the market over the past month on suggestions of imminent rate cuts, to figure out trades on their own until official announcements by the world’s two top central banks.
The good news for such gold bulls is they may not have to wait out an entire week to discover the Fed’s game. A U.S. rate cut is almost certain if the ECB executes its own easing on Thursday. Market odds for an ECB cut surpassed 50% last week, with a reduction of 10 basis points on the card. Smaller central banks in South Korea and South Africa already cut rates last week.
Most interest rates traders expect a Fed reduction of 25 basis points on July 31, according to Investing.com's Fed Rate Monitoring Tool. That would put the federal funds rate at 2% to 2.25%. Another 25-bps cut has been priced for the Fed’s September meeting.