Gold price trends measured in terms of XAU/USD, faced pressure and dropped when nearing its peak of $2,265 during early trading on Monday in New York. This decline occurred as the US Dollar strengthened following a positive report from the United States Institute of Supply Management (ISM). The ISM revealed that the Manufacturing PMI exceeded expectations, rising to 50.3 from 47.8, signaling growth in the manufacturing sector for the first time in 16 months. This was above the anticipated 48.4 and the previous month’s 49.2 in New Orders Index.
The US Dollar Index (DXY) climbed to 104.90 due to improved factory conditions suggesting a strengthening US economy. Additionally, heightened economic activities in the US this week led to increased demand for US Dollars in the short term.
Gold Price Trends and Federal Reserve Expectations
Despite recent fluctuations, gold remains strong due to speculation about potential Federal Reserve interest rate cuts in June. Fed Chair Jerome Powell indicated that a decrease in core Personal Consumption Expenditures inflation data in February aligns with the Fed’s goal of a 2% inflation target. This growing belief in rate cuts, following two years of rate hikes, makes US bonds less attractive compared to gold. During Monday’s European session, interest rates on 10-year US Treasury bonds briefly rose before falling to 4.20%.
Market Digest: Gold Price Adjustments and Rate Cut Speculations
Gold prices fell from a peak of $2,260 but continued to attract buyers, anticipating Federal Reserve rate cuts in June. Powell’s acknowledgment of improved inflation numbers increased expectations of rate cuts, with traders now estimating a 68% chance of cuts in June, up from 60% prior to the inflation data. Despite this, Powell emphasized that the Fed does not need to rush into rate cuts, stressing that further inflation improvements are necessary.
Inflation increased by 0.3% in February and rose 2.8% over the past year, with January’s figures revised upwards. The Fed’s preferred inflation measure is now at its lowest in nearly two years, heightening speculation of rate cuts.
Technical Analysis: Gold Price Resistance Levels
Gold prices fell after reaching a high of $2,265, surpassing the previous peak of $2,223 set on March 21. Despite this, the trend suggests potential for further gains, with all moving averages indicating bullish sentiment. The Relative Strength Index (RSI) stands at 78.00, signaling rapid price increases and potential overvaluation. The current conditions suggest that gold prices may remain elevated for some time without immediate changes.
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