Gold prices climbed by 0.80% as US Treasury yields fell due to mixed economic reports, fueling speculation that the Federal Reserve may ease its monetary policy. The risk-off sentiment drove gold from $2,314 to $2,345, offering investors hope amid economic uncertainty.
Impact of US Economic Data on Gold
Last week, the US Core Personal Consumption Expenditure (PCE) Price Index, a key inflation gauge, remained stable, reinforcing the idea of potential interest rate cuts. Moreover, reports from S&P Global and the Institute for Supply Management (ISM) showed mixed business activity results. Notably, ISM reported a contraction for the second consecutive month.
Declining US Treasury Yields and Dollar Weakness
This economic data contributed to a drop in US Treasury bond yields, with the 10-year yield declining by 11 basis points to 4.392%. The US Dollar Index (DXY), which tracks the dollar’s value against six major currencies, also fell by 0.5%, reaching 104.07.
Geopolitical Developments and Market Sentiment
On the geopolitical front, Hamas accepted a cease-fire proposal from US President Joe Biden, though Israeli President Netanyahu rejected it, demanding certain conditions be met first. These events added to the overall risk-off environment, pushing investors towards safer assets like gold.
Gold Market Technical Analysis
Gold prices continued their upward trajectory, rebounding from the 50-day Simple Moving Average (SMA) at $2,324. The S&P Global report showed an increase in Manufacturing PMI for May, rising to 51.3, while ISM’s report showed further contraction. Traders are now anticipating a 59% chance of a rate cut, as per the CME FedWatch Tool.
Economic Data Outlook and Future Predictions
Looking ahead, key US economic reports, including Factory Orders, JOLTS Job Openings, and the Nonfarm Payrolls report, could further influence gold prices. The Chicago Board of Trade (CBOT) data indicates the market is pricing in only 32 basis points of rate cuts in 2024.
Future Gold Price Movement
Gold’s momentum remains strong, with the potential to rise further if it reclaims the $2,400 mark. If gold breaks this level, it could target the year-to-date high of $2,450 and possibly reach $2,500. However, if it drops below $2,331, it may test the May 8 low of $2,303 and even the May 3 cycle low of $2,277.
Conclusion
Gold prices are benefiting from the current economic landscape, with mixed data and declining Treasury yields creating optimism for potential rate cuts. Keep an eye on upcoming US economic reports, as they may shape the next moves in gold prices. For more gold price updates, visit our Daily Gold Update or explore market trends at Daily Gold Signal.
