Fed rate cuts and gold prices remained steady on Monday as U.S. Treasury yields held firm. Traders are cautious ahead of critical economic data releases that could influence the Federal Reserve’s interest rate decisions. The metal logged a gain of over 4% in the second quarter, reflecting ongoing market volatility.
Rising Treasury Yields and Inflation Data
On Monday, U.S. Investors expected important economic reports, leading to a rise in Treasury yields. The 10-year Treasury yield increased by 7 basis points to 4.412%, while the 2-year yield went up by more than 3 basis points to 4.758%. Core PCE, excluding food and energy, increased by 0.1% monthly and 2.6% annually, meeting Dow Jones estimates. Headline inflation remained flat month-over-month, also rising 2.6% on an annual basis.
Focus on Labor Market Data
This week will see attention on several crucial labor market reports fed rate cuts and gold prices, including job openings, ADP’s private payrolls, and June’s nonfarm payrolls data. If these indicators signal a slowdown in the labor market, it could increase expectations for interest rate cuts. Furthermore, data on the manufacturing sector and construction spending scheduled for Monday will provide additional insights into market sentiment. Notably, the recent increase in the 10-year Treasury yield has reduced the attractiveness of assets like gold that do not generate interest.
Anticipation of Fed Chair Powell’s Remarks
Investors are anxiously anticipating comments from Fed Chair Jerome Powell on Tuesday, along with the release of the latest policy meeting minutes on Wednesday, and Friday’s nonfarm payrolls data. Powell’s commitment to using data to guide decisions implies that weaker payroll figures might push up gold prices. Analysts forecast gold could soar to $2,600 by year-end, driven by expected Fed rate cuts, with short-term support at $2,275.
Market Sentiment and Dollar Influence
Recent data indicated unchanged U.S. Prices in May saw modest growth in consumer spending. Current market sentiment suggests a 63% probability of a Fed rate cut in September, with another expected in December. political changes in France have bolstered the euro, causing a decline in the U.S. Dollar Index, which generally supports gold prices denominated in dollars.
Market Forecast
Considering the stable economic indicators and the possibility of more rate cuts, the forecast for gold prices remains cautiously optimistic. Although short-term variations may arise, favorable data could drive gold prices up in the next few months, creating opportunities for traders.
Technical Analysis
XAU/USD is moving up on Monday, but gains are limited by the 50-day moving average at $2337.66. This level is acting as resistance, but it might be surpassed later in the week if the Fed minutes or Non-Farm Payrolls report indicate a potential rate cut in September, potentially pushing prices toward the initial target of $2387.79.
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