Gold continues bearish tone as it experienced a slight decline on Tuesday, trading a quarter of a percent lower. This drop occurred after the metal faced rejection at the $2,315 resistance level late Monday. Higher expectations for US interest rates are impacting the precious metal’s performance.
1. Impact of US Interest Rates on Gold
The release of strong US job data last Friday indicated ongoing inflationary pressures. This reduces the likelihood that the US Federal Reserve (Fed) will lower interest rates in September. Higher interest rates increase the opportunity cost of holding non-yielding assets like gold, making it less appealing to investors.
2. Response to US Job Market Data
The positive wage and employment data from the US Nonfarm Payrolls (NFP) report prompted a reevaluation of US interest-rate expectations. Gold continues bearish tone as the Fed is now expected to maintain higher interest rates for a longer period. According to the CME FedWatch tool, the probability of a rate cut in September fell from 67% to just over 50% after the NFP release.
3.Analyzing the Global Interest Rates Landscape and Its Impact on Gold
In contrast to the US, the global interest rates outlook is more subdued, offering some support for gold. The Bank of Canada (BoC) recently cut its overnight rate by 0.25% to 4.75%, and the European Central Bank (ECB) made a similar move. Lower inflation data in Switzerland has sparked speculation that the Swiss National Bank (SNB) might cut rates at its June 20 meeting after an initial rate cut in March.
4. Upcoming Economic Indicators
Gold continues bearish tone as traders focus on the upcoming Federal Reserve meeting concluding on Wednesday and the US Consumer Price Index (CPI) data for May, which is also expected on the same day. These events could provide further direction for gold prices.
5. Technical Analysis: Gold’s Short-Term Downtrend
Gold recently retested the $2,315 resistance level and began to decline again. This suggests a continuation of the short-term downtrend. The next downside target is around $2,285, with further support at $2,279 if the decline continues. Conversely, a break above $2,315 could indicate a loss of momentum in the downtrend and potential for upside.
6. Medium and Long-Term Trends
Despite the short-term weakness, gold’s medium and long-term trends remain bullish. There is a significant potential for recovery in the future.
For more detailed updates and analysis on gold trends, visit Daily Gold Signal. Additionally, check out the latest Daily Gold Update for comprehensive insights.
