Gold fell near multi week lows as Fed rate cut expectations were decreased.
During the early European session on Monday, the gold price (XAUUSD) entered a negative consolidation phase and oscillated in a range near its lowest level in over a month, falling below $2,300.
The stronger US NFP report suggests that the Fed may delay beginning its rate-cutting cycle.
The well-known Nonfarm Payrolls (NFP) data revealed that the world’s largest economy produced a lot more jobs than projected in May, pushing investors to pull back their expectations on a September interest rate decrease by the Federal Reserve (Fed). This keeps US Treasury bond yields rising and pushes the US Dollar (USD) to a nearly one-month high, acting as a headwind for the non-yielding yellow metal.
Furthermore, news that the People’s Bank of China (PBoC) suspended gold purchases for its reserves in May, capping an 18-month buying frenzy, appear to undercut the gold price. However, a cautious market atmosphere provides some support for the safe-haven XAUUSD and helps prevent further losses.
The focus now switches to US consumer inflation data and the FOMC decision on Wednesday.
Traders also appear reluctant to put aggressive directional bets ahead of this week’s big US data and central bank event risk the release of the most recent US consumer inflation figures and the result of the two-day FOMC policy meeting On Wednesday. This, in turn, calls for caution before preparing for additional losses.
Daily Market Movers: Gold price struggles to attract buyers despite diminished Fed rate drop forecasts and bullish USD.
The optimistic US employment data reported on Friday stoked speculation that the Federal Reserve may postpone the start of the rate-cutting cycle, limiting the upside for the non-yielding gold price.
The headline NFP revealed that the US economy added 272K jobs in May, exceeding the 185K expected and the prior month’s upwardly revised 175K, despite an increase in the unemployment rate to 4.0%.
Furthermore, Average Hourly Earnings beat consensus projections and climbed by 4.1% during the year through May, which may push up prices and necessitate The Federal Reserve intends to keep interest rates high for an extended period.
The benchmark 10-year US government bond yield rose to 4.45% following the data, while the rate-sensitive 2-year yield stays close to 5.0%, supporting the US Dollar and acting as a headwind for the XAUUSD.
People’s Bank of China (PBoC) ended 18 months of continuous gold purchases in May.
Meanwhile, the People’s Bank of China (PBoC) ended 18 months of continuous gold purchases in May, creating concerns about declining demand for the metal in one of the world’s largest buyers and favoring bearish traders.
Before making directional bets, investors prefer to wait until this week’s release of the latest US consumer inflation numbers and the highly anticipated FOMC monetary policy decision on Wednesday.
The probability of a rate cut in September have dropped to roughly 50% following The US jobs numbers fell from about 70% on Thursday, and markets now expect only one 25-basis-point drop this year, in November or December.
As a result, investors will be looking for new signals on when the Fed will begin decreasing interest rates amid the US economy’s continued resilience, which will be critical in determining the next leg of the commodity’s directional move.
