- Gold was rejected from the 100-day SMA at $1,940.
- US services PMIs from ISM and S&P Global were weak in May.
- US bond yields fell across the board on the disappointing data.
During Monday’s session, the Gold It gained bullish momentum and reached towards the $1,960 level after bottoming out at the 100 SMA in the $1,940 area. This rise was triggered by the release of disappointing ISM services PMI data for May, which prompted a sell-off in the US dollar due to falling US bond yields.
US bond yields fall across the board after disappointing US data.
The US Institute of Supply Management (ISM) reported a services PMI of 50.3 in May, down from 51.5 expected and down from 51.9 the previous month. In addition, the final estimate for the S&P Global Composite for the same month fell to 54.3, below the 54.5 forecast, after the previous reading of 55.1. For its part, the final revision of the PMI for the services sector stood at 54.9, slightly below the preliminary reading of 55.1.
Following the Release, investors are sensing a stronger case for a no rate hike from the Federal Reserve (Fed) at the June 13-14 meeting. In this sense, the CME FedWatch tool indicates that there is a greater probability (77%) that the Fed will not raise interest rates at its next meeting in June, with expectations of maintaining the target rate at 5.25%.
These dovish bets by the Fed were reflected in falling US bond yields. The 10-year bond yield is trading at 3.67%, while the 2-year yield stands at 4.50% and the 5-year yield stands at 3.85%. As US bond rates could be seen as the opportunity cost of holding gold out of yield, the yellow metal gained traction.
Levels to watch
Per the daily chart, XAU/USD maintains a neutral near-term outlook as RSI and MACD suggest sellers are struggling to maintain their dominance, while the bulls are starting to gain momentum. Both indicators remain in negative territory, but point to a depletion of bearish momentum.
If XAU/USD continues to rise, the next resistance to watch is at the $1,960 area, followed by the $1,977 20-day SMA and the $1,990 area. On the other hand, supports are seen at the 100-day SMA at $1,940, and then the $1,930 and $1,920 zones.
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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.
