- Gold falls 0.28%, reacting to Powell’s comments at the ECB forum.
- Powell cautiously optimistic about disinflation, stresses need for more progress before cutting rates.
- US Treasury yields are holding steady, while the US Dollar fluctuates in a familiar range.
- Strong US jobs data: Job openings beat expectations, highlighting economic resilience.
Gold prices fell during the North American session as market participants digested comments by Federal Reserve (Fed) Chairman Jerome Powell at a European Central Bank (ECB) forum in Portugal. Powell took a slightly dovish stance, but US Treasury yields remained firm. The Dollar fluctuated but remained within familiar levels. Thus, XAU/USD is trading at $2.324, down 0.28%.
Powell said the disinflation process has resumed, but said he would like to see more progress before cutting interest rates. He added, “Because the U.S. economy is strong and the labor market is strong, we have the ability to take our time and get it right.”
He acknowledged that the risks of the Fed’s dual mandate have become more balanced, noting that “we have to manage them.”
US employment data revealed that job openings rose surprisingly above estimates, showing the robustness of the labor market amid the high interest rates of 5.25%-5.50% set by the Fed.
More data is expected on Wednesday, led by the release of minutes from the latest Federal Open Market Committee (FOMC) meeting, along with S&P Global Services PMIs and the Institute for Supply Management (ISM).
Data will resume on Friday as US markets will be closed on Thursday for Independence Day. For Friday, traders will focus on the June Non-Farm Payrolls (NFP) report.
Market Movers Daily Digest: Gold Price Retreats Below $2,330 Amid Strong JOLTS Data
- The U.S. Bureau of Labor Statistics released its May job openings and turnover reports, which showed 8.14 million job openings, beating expectations and falling from April’s 7.919 million, the lowest level in three years.
- Business activity in the US manufacturing sector was mixed. Traders are now focusing on the upcoming release of service sector data on Wednesday.
- According to the CME’s FedWatch tool, the odds of a 25-basis-point Fed rate cut in September are 63%, up from 58% on Monday.
- The December 2024 federal funds rate futures contract implies the Fed will ease policy by just 36 basis points (bps) by the end of the year.
Technical Analysis: Gold Price Fluctuates Near the Neckline of the Head and Shoulders Pattern
Gold has a bullish bias but is consolidating near the neckline of the Head and Shoulders pattern around $2,320-$2,350. Despite the bearish pattern on the chart, momentum has turned neutral with the Relative Strength Index (RSI) approaching its neutral line of 50. This indicates a stalemate between buyers and sellers.
For a bearish continuation, sellers need to drive prices below $2,300. If successful, the next demand zone would be the May 3 low of $2,277, followed by the March 21 high of $2,222. Further declines would target the head-and-shoulders pattern between $2,170 and $2,160.
Conversely, if buyers break $2,350, they would target key resistance levels such as the June 7 cycle high of $2,387, eventually targeting the $2,400 mark.
Gold FAQs
Gold has played a pivotal role in human history as it has been widely used as a store of value and a medium of exchange. Today, apart from its luster and use for jewelry, the precious metal is considered a safe haven asset, meaning it is considered a good investment in turbulent times. Gold is also considered a hedge against inflation and currency depreciation as it is not dependent on any particular issuer or government.
Central banks are the largest holders of gold. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy gold to improve the perception of the strength of the economy and the currency. High gold reserves can be a source of confidence in a country’s solvency. Central banks added 1,136 tonnes of gold worth about $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the largest annual purchase on record. Central banks in emerging economies such as China, India and Turkey are rapidly increasing their gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasury bonds, which are the main reserve and safe haven assets. When the Dollar depreciates, the price of Gold tends to rise, allowing investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken the price of Gold, while sell-offs in riskier markets tend to favor the precious metal.
The price of Gold can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can cause the price of Gold to rise rapidly due to its status as a safe haven asset. As a non-yielding asset, the price of Gold tends to rise when interest rates fall, while rising money prices tend to weigh down the yellow metal. Still, most of the movements depend on how the US Dollar (USD) performs, as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep Gold prices in check, while a weaker Dollar is likely to push Gold prices higher.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
