During the early European session on Monday, the price of gold (XAU/USD) faced selling pressure as the People’s Bank of China (PBoC) refrained from purchasing gold for the second consecutive month in June, as per official data released on Sunday. This decision by China, the largest consumer of bullion globally, has the potential to impact gold prices negatively.
Conversely, speculation has been mounting that the US Federal Reserve (Fed) may cut interest rates in the third quarter, which could provide support to the non-yielding gold market. Additionally, political uncertainty in France following indications of a hung parliament in the final round of the French parliamentary elections might bolster safe-haven demand for gold.
Market attention now turns to Federal Reserve Chair Jerome Powell’s upcoming testimony on Tuesday, preceding the release of US June Consumer Price Index (CPI) inflation data on Thursday. These events are expected to provide further guidance on future monetary policy decisions affecting gold prices.
Market Analysis: Gold Price Retreats as PBoC Holds Off on Purchases
In related market movements, the US Nonfarm Payrolls (NFP) for June showed an increase of 206,000 jobs, surpassing market expectations of 190,000, despite a slight uptick in the unemployment rate to 4.1% from 4.0% in May. Average Hourly Earnings, a measure of wage inflation, dropped to 3.9% year-over-year in June, aligning with market forecasts.
The robust employment data has heightened expectations of a Federal Reserve interest rate cut in September, with market probabilities rising to 77%, up from 70% prior to the report.
Meanwhile, in an unexpected development, preliminary results from the French parliamentary elections suggest a potential victory for the left-wing New Popular Front (NFP), led by Jean-Luc Mélenchon, which could further enhance gold’s appeal as a safe-haven asset amidst political uncertainty.
“It appears that gold prices remain slightly elevated, prompting the PBoC to await a potential correction before resuming its gold purchasing program,” noted Nitesh Shah, commodity strategist at WisdomTree.
Technical Analysis: Gold Maintains Bullish Momentum
Despite a decline during the session, gold prices continue to exhibit a bullish trend on the daily chart, supported by trading above the key 100-day Exponential Moving Average (EMA). The precious metal has also broken out of a descending trend channel established since May 10. The 14-day Relative Strength Index (RSI) remains in bullish territory above the 50-midline, indicating a favorable outlook for further upside movement.
Looking ahead, resistance levels for XAU/USD are anticipated at psychological levels around $2,400, followed by $2,432 (April 12 high) and potentially reaching the all-time high near $2,450.
On the downside, initial support rests within the $2,330-$2,340 range, marking the June 17 low and former resistance zone. Further declines could test the 100-day EMA at $2,273.
US Dollar Performance Today
Today’s performance of the US Dollar (USD) against major currencies shows it weakest against the Swiss Franc, reflecting current market dynamics and investor sentiment towards global currencies.
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