Gold attracts some buyers, reversing part of Friday’s drop from a two week high.
During the Asian session on Monday, the gold price (XAUUSD) found some support near $2,317 and appears to have halted its retracement decline from a two-week high reached on Friday.
Bets on a September Fed rate cut and geopolitical risk provide some support for the XAUUSD.
The growing agreement that the Federal Reserve (Fed) will begin its rate-cutting cycle in September despite evidence of weakening inflationary pressures serves as a tailwind for the non-yielding yellow metal. Adding A milder risk tone, persisting geopolitical tensions, and political uncertainty in Europe all support the safe-haven commodity.
The USD reaches its highest level since May 9, acting as a headwind for the commodity.
Meanwhile, stronger-than-expected US PMIs issued on Friday indicated a still resilient economy. This comes on top of the Fed’s hawkish surprise earlier this month, which forecasted only one rate decrease in 2024, supporting the US Dollar (USD) and limiting any major gain for the gold market. Traders may also opt to sit out until this week’s release of the final US Q1 GDP print and the Personal Consumption Expenditures (PCE) Price Index before making new directional bets.
Daily Market Movers: Gold price benefits from Fed rate drop expectations, although stronger USD curbs gains.
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.
The Federal Reserve took a more hawkish position at the close of its June meeting, but policymakers continue to advocate for only one interest rate drop by the end of the year.
This, together with Friday’s better-than-expected US flash PMIs, pushes the US Dollar to its highest level since May 9 and serves as a big headwind for the commodity.
The flash US composite PMI increased from 54.5 in May to 54.6 this month, the highest level since April 2022, indicating that the economy concluded the The second quarter concluded on a strong note.
Meanwhile, the prices paid for inputs measure declined to 56.6 from 57.2 the previous year, while the output prices gauge dipped to 53.5, representing one of the smallest increases in four years.
This follows softer US consumer and producer prices, which, combined with last week’s poor US retail sales numbers, keep bets on two rate cuts this year on the table.
Markets are currently pricing in more than a 60% possibility that the Federal Reserve will start decreasing interest rates at its September meeting.
According to the CME Group’s FedWatch Tool, the markets are currently pricing in more than a 60% possibility that the Federal Reserve will start decreasing interest rates at its September meeting.
The US central bank is expected to decrease borrowing costs further in December, acting as a drag for US Treasury bond yields. and provides support for the XAUUSD.
The security accord signed in Pyongyang by Russian President Vladimir Putin and North Korean leader Kim Jong-un raises the possibility of more global tensions rising.
Furthermore, French President Emmanuel Macron’s decision to schedule quick elections has raised fears about broader political uncertainty, which should limit losses in the safe-haven metal.
Traders will continue to take cues from FOMC members’ statements ahead of this week’s announcement of the final US GDP and the Personal Consumption Expenditure (PCE) Price Index.
