Gold price oscillated in a narrow trading area amid mixed fundamental clues.
The gold price (XAUUSD) struggled to gather traction on Monday, oscillating in a narrow trading zone below the $2,330 level during the early European session.
Rising expectations for a September Fed rate cut weigh on the USD and support the metal.
Traders appear hesitant to place strong directional bets amid the uncertainties surrounding the Federal Reserve’s (Fed) rate-cut plan, resulting in sluggish range-bound price activity. The important US inflation figures reported on Friday confirmed market forecasts that the Federal Reserve will reduce interest rates in September and again in December. However, recent hawkish statements by a number of senior FOMC members showed that the central bank is in no hurry to lower interest rates.
Meanwhile, the US Dollar (USD) is expected to extend its post-US PCE corrective fall from a two-month high, serving as a tailwind for the gold market. Aside from that, continued geopolitical tensions and uncertainty about the result of France’s surprise snap election provide some support for the safe haven. Meanwhile, the rising likelihood of a Trump presidency has increased concerns about the adoption of harsh tariffs, which might drive inflation and lead to higher interest rates. This, in turn, pushes US Treasury bond yields to a multi-week high and should limit any significant gain for the non-yielding yellow metal.
Daily Market Movers: Gold price bulls remain on the sidelines as US bond yields rise.
A mix of diverging forces fails to provide meaningful impetus to the gold price, resulting in muted range-bound price action on the opening day of the new week.
Data released on Friday indicated that inflation in May fell to its lowest annual rate in more than three years, raising expectations of a Federal Reserve rate decrease in September.
The US Bureau of Economic Analysis stated that the Personal Consumption Expenditures (PCE) Price Index fell to 2.6% on an annual basis in May, down from 2.7% in April.
The core PCE price index, which Excluding volatile food and energy prices, the annual rate fell from 2.8% in April to 2.6% in May, the lowest since March 2021.
Geopolitics and political uncertainty provide a tailwind, but rising bond yields constrain gains.
The US dollar falls rapidly from a nearly two-month high in response to the in-line inflation report, reaching a multi-day low on Monday, adding support to the commodities.
The first round of France’s legislative election on Sunday revealed little about whether the far-right party will be able to form a government following next Sunday’s run-off.
Furthermore, President Joe Biden’s dismal debate with Republican opponent Donald Trump adds to political uncertainty amid geopolitical dangers, which supports the XAU/USD.
Meanwhile, an official survey revealed on Sunday that China’s manufacturing activity decreased for the second consecutive month in June. and services activity dropped to a five-month low.
However, the most recent data issued on Monday revealed that China’s Caixin Manufacturing PMI surprisingly pushed higher from 51.7 to 51.8 in June, compared to the 51.2 forecast.
Meanwhile, recent hawkish comments by important FOMC members have increased uncertainty about the Fed’s rate-cutting path, causing US Treasury bond rates to rise further.
Richmond Fed President Thomas Barkin said on Friday that he will take a careful approach to monetary policy because services and housing price-setters still have room to raise prices.
According to San Francisco Fed President Mary Daly, decreasing inflation indicates. That monetary policy is working, but it is too early to predict. When interest rates should be decreased.
This in turn should Keep an eye on any major appreciation for the non-yielding yellow metal ahead of this week’s key US macro reports, notably the NFP report on Friday.
Meanwhile, Gold traders will be watching the release of the US ISM Manufacturing PMI. Which, along with broader risk sentiment, is expected. To influence the commodity on Monday.
