Gold prices (XAU/USD) continue to decline for the second day in a row, touching their lowest point in over a week. Hawkish remarks from key Federal Reserve (Fed) officials suggest that the US central bank is unlikely to initiate a rate-cutting cycle soon, bolstered by the strength of the US economy. This sentiment supports a modest rise in US Treasury bond yields, which benefits the US Dollar (USD) and pressures the non-yielding yellow metal.
Current Market Influences on Gold Prices
Despite weaker consumer and producer prices for May keeping a September Fed rate cut in play, geopolitical risks in the Middle East and the ongoing Russia-Ukraine war offer some support to gold as a safe-haven asset. Traders are also cautious ahead of critical US macroeconomic data, including Thursday’s final Q1 GDP report and Friday’s Personal Consumption Expenditures (PCE) Price Index, which could influence Fed policy and gold’s direction.
Fed Rate-Cut Uncertainty and Market Movements
Federal Reserve policymakers are advocating for higher rates for an extended period, increasing US Treasury bond yields and limiting gold’s upside potential. Fed Governor Michelle Bowman expressed readiness to raise borrowing costs if inflation stalls, while Fed Governor Lisa Cook noted that rate cuts might be appropriate eventually, depending on inflation expectations. The US Consumer Confidence Index fell to 100.4 in June from 101.3 in May, reflecting economic concerns. This, along with recent weak US Retail Sales and easing inflation, keeps hopes alive for a September Fed rate cut, affecting the USD negatively.
Geopolitical Tensions and Safe-Haven Demand
The geopolitical landscape remains tense, with Russia blaming the US for an attack in Crimea and potential retaliatory measures, and ongoing fears of conflict between Israel and Lebanon due to provocations by Hezbollah. These factors help support gold prices as a safe-haven asset. Traders are also awaiting the PCE Price Index on Friday for further market direction.
Technical Analysis of Gold Prices
Technically, gold’s recent inability to surpass the 50-day Simple Moving Average (SMA) and the resulting decline suggest a bearish trend. Daily chart oscillators indicate growing negative momentum, hinting that gold might continue to fall. However, confirmation of this bearish trend would require a break below the ascending trendline support near $2,310. If this occurs, gold could drop below $2,300 and test the monthly low around $2,287-$2,286, with further declines potentially targeting the 100-day SMA support near $2,250 and then the $2,225-$2,220 region.
Conversely, any positive movement faces resistance near the 50-day SMA around $2,339-$2,340, with further barriers at the $2,368-$2,369 zone. Sustained strength above these levels could propel gold toward $2,387-$2,388 and possibly the $2,400 mark, negating the bearish outlook and aiming for the all-time peak around $2,450 reached in May. For more insights and updates, visit Daily Gold Signal. Check the latest Daily Gold Update.
