On June 25th, the Bank of Japan Governor Kazuo Ueda, in his first public remarks since returning to work after an illness, reiterated that risks of inflation exceeding the 2% target persist, and the central bank will proceed with further interest rate hikes at an appropriate time.
In a speech delivered on Wednesday, Ueda stated that as underlying inflation approaches 2% while financial conditions remain accommodative, the BOJ expects to continue raising interest rates and adjusting the degree of monetary easing in response to economic activity, prices, and financial conditions. As Ueda was previously hospitalized with a liver cyst infection, the speech was read on his behalf by Deputy Governor Ryozo Himino. Ueda only returned to work on Tuesday. The governor's comments reiterated the BOJ's consistent policy stance, offering no new policy signals and aligning closely with the official communication following last week's interest rate decision. He noted that the timing and pace of rate hikes would depend on multiple factors, including the impact of the war in Iran. This represents a rare public statement by a BOJ official explicitly incorporating geopolitical risks into monetary policy considerations.
In addition, following Goldman Sachs and Deutsche Bank, another international investment bank has lowered its gold price target.
BMO Capital Markets stated in its Q3 commodity outlook report that it expects the average gold price in the second half of this year to be around $4,625 per ounce, a 5% downward revision from its previous forecast.
The bank's analysts said, "Nevertheless, we still believe that if low oil prices are maintained, thereby supporting a rebound in emerging market demand, there is room for spot gold prices to recover." Although gold may continue to face pressure for the remainder of the year, BMO has not lost confidence in the precious metal. The bank's analysts maintain their long-term expectation that gold will return above $5,000 by Q1 2027 and forecast average prices around $4,200 per ounce for Q2 and Q3 next year.
Data to watch today includes Germany's July GfK Consumer Confidence Index, the US May PCE Price Index annual rate, the US Q1 Final Real GDP annualized quarter-on-quarter rate, the US April Preliminary Durable Goods Orders month-on-month rate, and the US Initial Jobless Claims for the week ending June 20th.
Gold/USD
Gold declined sharply yesterday, falling below the 4,000 mark and hitting a fresh seven-month low. The pair is currently trading around 3,990. In addition to the sustained pressure from rising expectations of a Federal Reserve rate hike, the uptick in US Treasury yields was a significant factor weighing on gold. Furthermore, several Wall Street investment banks lowering their gold price expectations also exerted some downward pressure on the pair. Resistance is seen near 4,100 today, with support around 3,900.
USD/JPY
USD/JPY moved higher in a choppy session yesterday, closing slightly up. The pair is currently trading around 161.80. The primary support for the gain came from a stronger US dollar index, which rose on multiple tailwinds including hawkish remarks from Fed officials and heightened expectations for a Fed rate hike. However, concerns about renewed Japanese intervention in the currency market and hawkish comments from the BOJ Governor, which fueled expectations of a BOJ rate hike, limited the pair's upside. Resistance is seen near 162.50 today, with support around 161.00.
USD/CAD
USD/CAD advanced in a volatile session yesterday, reaching a fresh 14-month high. The pair is currently trading around 1.4230. The main driver for the rise was the continued climb of the US dollar index, supported by hawkish Fed rhetoric and increased expectations for a Fed rate hike. Additionally, a sharp decline in crude oil prices, pressured by easing tensions in the Middle East, was also a key factor supporting the pair's ascent. Resistance is seen near 1.4300 today, with support around 1.4150.
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