Gold Prices Aim Higher as Fed Rate Cut Bets Weigh on the Dollar
Gold Prices Aim Higher as Fed Rate Cut Bets Weigh on the Dollar
By:Ilya Spivak
All eyes turn to US consumers as the markets dare to dream about Fed rate cuts.
- Benign US PPI report helps revive Fed interest rate cut speculation.
- University of Michigan US consumer confidence gauge now in focus.
- US dollar selling may continue as bonds and gold keep climbing.
Stock markets steadied as US producer price index (PPI) data showed a smaller-than-expected rise in wholesale inflation, breathing new life into Federal Reserve interest rate cut speculation. Treasury bonds rose as rates fell across the yield curve, gold prices rallied, and the US dollar slumped against major currencies.
The report showed that PPI rose 0.1% in May, falling short of median forecasts calling for a rise of 0.2%. The core wholesale inflation rate excluding food and energy prices fell to 3% year-on-year, the lowest since August 2024. The headline rate edged up to 2.6% from 2.5% in April, in line with economists’ expectations.
Soft US PPI inflation data helps revive Fed rate cut bets
Perhaps most critically, the monthly rise was primarily driven by a rebound in trade services prices, showing that wholesalers rebuilt margins as they passed on higher input costs to consumers. This helped bolster confidence in May’s seemingly benign consumer prices (CPI) data published yesterday.
In April, wholesalers shielded consumers from input price inflation linked to higher tariffs, shouldering the rise via lower margins. This made that month’s “normal”-looking CPI data appear somewhat like a mirage. In May, both CPI and PPI appear to be relatively staid despite renewed pass-through, hinting the Fed may have room to cut rates sooner.
The policy outlook implied in benchmark Fed Funds futures shifted back alignment with the US central bank’s baseline projection of 50 basis points (bps) in rate cuts this year and in 2026. At the start of the week, the markets were about 10bps more hawkish than officials’ estimates, with more cuts skewed to next year after a late start in 2025.
Will US consumer confidence data help or hurt the stock market?
The spotlight now turns to US consumer confidence data from the University of Michigan (UofM). It is expected to show a slight improvement after sentiment dropped to a three-year low in April and held there in May. The anchoring on display last month came as deepening pessimism about current conditions was offset by a modest uplift in expectations.
If continued moderation in May’s figures comes alongside easing one-year inflation expectations – which have moved inversely of the headline sentiment index since the COVID-19 outbreak – that may give the Fed a bit more encouragement to get on with easing. The dollar may keep falling as gold and Treasury bonds rise against this backdrop.
As for stocks, their read-through may depend on what the numbers stay about consumption, the biggest driver of US gross domestic product (GDP) growth. It was worryingly soft in the first quarter, adding the least in nearly two years to overall output. Leading data like jobless claims, where the four-week average is at a two-year high, hint at more weakness.
Ilya Spivak, tastylive head of global macro, has 15 years of experience in trading strategy, and he specializes in identifying thematic moves in currencies, commodities, interest rates and equities. He hosts #Macro Money and co-hosts Overtime, Monday-Thursday. @Ilyaspivak
For live daily programming, market news and commentary, visit #tastylive or the YouTube channels tastylive (for options traders), and tastyliveTrending for stocks, futures, forex & macro.
Trade with a better broker, open a tastytrade account today. tastylive, Inc. and tastytrade, Inc. are separate but affiliated companies.
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.
tastylive content is created, produced, and provided solely by tastylive, Inc. (“tastylive”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, digital asset, other product, transaction, or investment strategy is suitable for any person. Trading securities, futures products, and digital assets involve risk and may result in a loss greater than the original amount invested. tastylive, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastylive is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparisons, statistics, or other technical data, if applicable, will be supplied upon request. tastylive is not a licensed financial adviser, registered investment adviser, or a registered broker-dealer. Options, futures, and futures options are not suitable for all investors. Prior to trading securities, options, futures, or futures options, please read the applicable risk disclosures, including, but not limited to, the Characteristics and Risks of Standardized Options Disclosure and the Futures and Exchange-Traded Options Risk Disclosure found on tastytrade.com/disclosures.
tastytrade, Inc. ("tastytrade”) is a registered broker-dealer and member of FINRA, NFA, and SIPC. tastytrade was previously known as tastyworks, Inc. (“tastyworks”). tastytrade offers self-directed brokerage accounts to its customers. tastytrade does not give financial or trading advice, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastytrade’s systems, services or products. tastytrade is a wholly-owned subsidiary of tastylive, Inc.
tastytrade has entered into a Marketing Agreement with tastylive (“Marketing Agent”) whereby tastytrade pays compensation to Marketing Agent to recommend tastytrade’s brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastytrade. tastytrade and Marketing Agent are separate entities with their own products and services. tastylive is the parent company of tastytrade.
tastycrypto is provided solely by tasty Software Solutions, LLC. tasty Software Solutions, LLC is a separate but affiliate company of tastylive, Inc. Neither tastylive nor any of its affiliates are responsible for the products or services provided by tasty Software Solutions, LLC. Cryptocurrency trading is not suitable for all investors due to the number of risks involved. The value of any cryptocurrency, including digital assets pegged to fiat currency, commodities, or any other asset, may go to zero.
© copyright 2013 - 2025 tastylive, Inc. All Rights Reserved. Applicable portions of the Terms of Use on tastylive.com apply. Reproduction, adaptation, distribution, public display, exhibition for profit, or storage in any electronic storage media in whole or in part is prohibited under penalty of law, provided that you may download tastylive’s podcasts as necessary to view for personal use. tastylive was previously known as tastytrade, Inc. tastylive is a trademark/servicemark owned by tastylive, Inc.