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Gold price plummets as PBoC pauses gold buying

  • Gold price loses momentum below $2,400 barrier on Monday.
  • The yellow metal is on the decline as China’s central bank has stopped buying for the second month in June.
  • Expectations of a Fed rate cut in September could limit the downside for XAU/USD.

Gold (XAU/USD) price is attracting some sellers during the Asian session on Monday. The precious metal is losing traction as the People’s Bank of China (PBoC), the Chinese central bank, kept gold buying on hold for the second month in June, according to official data released on Sunday. It is worth noting that China is the world’s largest consumer of bullion, and the pause in gold buying could weigh on the gold price.

On the other hand, growing speculation that the US Federal Reserve (Fed) will cut interest rate in the third quarter could lift the price of non-yielding Gold. Also, political uncertainty in France after exit polls indicated that the final round of French parliamentary elections pointed to a hung parliament, which could boost safe haven assets such as Gold. Traders will take further cues from Fed Chairman Jerome Powell who testifies on Tuesday ahead of US Consumer Price Index (CPI) inflation data for June on Thursday.

Daily Market Wrap: Gold price loses ground as PBoC refrains from buying gold for second month

  • US nonfarm payrolls (NFP) rose by 206,000 in June, following an increase of 218,000 (revised from 272,000) in May. This figure was above the market expectation of 190,000.
  • The unemployment rate rose to 4.1% in June from 4% in May. Average hourly earnings, or wage inflation, fell to 3.9% annually in June from 4.1% in May, in line with market expectations.
  • The recent jobs data has increased the likelihood of a Fed rate cut in September, with markets pricing in a 77% chance, up from 70% before the report.
  • In a surprise result, polls indicated that the left-wing New Popular Front (NFP), led by Jean-Luc Mélenchon, appears on track to win a majority of seats in the second round of voting in France’s parliamentary elections on Sunday, according to The Economist.
  • “It seems that gold prices are still a bit too high, and the PBoC is waiting for a further pullback before resuming its gold buying program,” said Nitesh Shah, commodity strategist at WisdomTree.

Technical Analysis: Gold price maintains long-term bullish trend

Gold price is retreating on the day. Technically, the yellow metal is maintaining the uptrend on the daily chart as it is holding above the 100-day exponential moving average (EMA). The precious metal is sustaining a breakout above a downtrend channel that was formed on May 10. Gold’s path of least resistance is to the upside as the 14-day Relative Strength Index (RSI) is in the bullish zone above the 50-day midline.

The first bullish barrier for XAU/USD will emerge at the psychological level of $2,400. The additional upside filter to watch is $2,432, a high from April 12. The next potential resistance zone is seen at an all-time high of $2,450.

On the downside, the initial support level for the yellow metal lies at the $2,330-$2,340 zone, representing the June 17 low and former resistance zone. Extended losses could see a drop to $2,273, the 100-day EMA.

US Dollar Price Today

The table below shows the percentage change of the US Dollar (USD) against the major currencies listed today. The US Dollar was the strongest against the Canadian Dollar.

USD -0.39% -0.42% 0.18% -0.42% -0.39% -0.38% -0.52%
EUR 0.37% -0.03% 0.48% 0.07% -0.03% -0.01% -0.17%
GBP 0.42% 0.02% 0.60% 0.00% 0.03% 0.03% -0.10%
CAD -0.34% -0.56% -0.83% -0.45% -0.74% -0.51% -0.83%
AUD 0.34% -0.05% -0.10% 0.51% -0.11% -0.08% -0.21%
JPY 0.39% 0.00% -0.03% 0.57% -0.01% 0.00% -0.13%
NZD 0.38% -0.01% -0.03% 0.57% -0.03% -0.01% -0.13%
CHF 0.52% 0.12% 0.10% 0.70% 0.13% 0.13% 0.13%

The heatmap shows the percentage changes of the major currencies relative to each other. The base currency is chosen from the left column, while the quote currency is chosen from the top row. For example, if you choose the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change shown in the chart will represent EUR (base)/JPY (quote).

Source: Fx Street

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