The gold price attracts buyers during early European trading hours on Monday, recovering from a recent dip after hitting a two-week high on Friday. Despite the Federal Reserve’s hawkish stance, with only one rate cut projected for 2024, markets are still anticipating two cuts this year due to easing inflation. This expectation is lowering US Treasury bond yields, along with a softer risk sentiment, geopolitical tensions, and political uncertainty in Europe, supporting the safe-haven appeal of gold.
Market Overview
The US economy showed resilience with stronger-than-expected PMI data last Friday. This boosted the US Dollar to its highest level since May 9, which limited further gains for gold. Traders are cautious, waiting for significant US macroeconomic data this week, including the final Q1 GDP print and the PCE Price Index. Comments from influential FOMC members will also be closely monitored for short-term market direction.
Key Market Movers
September Fed Rate Cut Expectations
The gold price attracts buyers remains supported by the prospect of a Fed rate cut in September. A combination of various forces leads to a subdued, range-bound price action at the start of the week. The Federal Reserve’s hawkish outlook, with only one rate cut expected by year-end, along with strong US PMIs, has strengthened the US Dollar. This poses a challenge for gold prices. The flash US composite PMI rose slightly from 54.5 in May to 54.6, the highest since April 2022, indicating a solid economic performance in Q2. However, a decrease in input and output prices suggests easing inflation, keeping the door open for potential rate cuts this year. According to CME Group’s FedWatch Tool, there’s over a 60% chance of a rate cut in September, with further reductions expected in December, impacting US Treasury yields and supporting gold prices.
Geopolitical and Political Influences
Rising geopolitical tensions, such as the security pact between Russia and North Korea, and political uncertainty in Europe, like French President Macron’s call for snap elections, are also influencing gold prices. These factors add to the safe-haven appeal of gold, limiting its losses.
Technical Analysis
From a technical perspective, gold’s recent decline appears to be a failed breakout attempt above the 50-day Simple Moving Average (SMA). The price found support near the $2,312 level, a key point to watch. If the gold price breaks below this support, it could weaken further, potentially testing the $2,300 level and the monthly low around $2,285. Continued selling could push prices towards the 100-day SMA near $2,247-$2,246. Conversely, the 50-day SMA near $2,341-$2,342 serves as a significant resistance. If the price can surpass this, it might aim for $2,368-$2,369 and possibly reach $2,400. Sustained strength beyond this level could negate the near-term bearish outlook, allowing a retest of the all-time high around $2,450.
Conclusion
Gold prices are currently influenced by a mix of economic data, Fed rate expectations, and geopolitical tensions. The market is closely watching upcoming US economic data and FOMC comments for further direction. For more updates on gold prices and market trends, visit Daily Gold Signal. For daily updates on gold, check out Daily Gold Update.
