- Gold prices have declined to around $2,332 an ounce as of the start of trading this week.
- This is as investor focus shifts to key US inflation reports due out this week to seek further clues about the Federal Reserve's monetary direction amid mixed signals from Fed officials.
- The US Producer Price Index is scheduled for release today, Tuesday, followed by the Consumer Price Index tomorrow, Wednesday.
- After the weaker-than-expected US jobs report for April and the disappointing job report last week, expectations for US rate cuts this year have increased.
- Markets expect the Fed to start easing monetary policy in September.
In recent months, gold prices have risen, driven by strong investment demand in the over-the-counter market, continued buying by global central banks, and increased demand from Asia. Escalating tensions in the Middle East also continue to support the safe-haven appeal of gold. In the latest development, Israel deployed tanks into eastern Jabalia in northern Gaza on Sunday after a night of heavy airstrikes and ground fire.
On the front of factors influencing the gold market, the 10-year US Treasury yield started the week's trading below 4.5% as traders eagerly await the release of key economic data. The focus will be on CPI and PPI data, as well as retail sales and industrial production figures, to gauge inflation and economic strength. In the meantime, investors will be paying close attention to comments from various Fed officials for clues about when the Fed may start cutting rates, particularly Fed Chairman Powell's appearance at the annual general meeting of the Association of Foreign Banks in Amsterdam today, Tuesday.
Overall, comments made by several policymakers last week indicated that rates would remain high for some time. Furthermore, the odds for Fed easing in September are currently 61% and 74% for November.
Another factor affecting the gold market is that the US dollar index fell to 105 on Monday as investors await key US inflation data this week which could impact Fed monetary policy expectations. Last week, the index ended with modest gains as Fed officials urged caution before cutting rates. In this regard, Fed Governor Michelle Bowman said she did not expect it would be appropriate to cut rates in 2024, while Dallas Fed President Lorie Logan said it was still too early to think about cutting rates.
Meanwhile, data on Friday pointed to a jump in consumer inflation expectations, although a sharp decline in US consumer confidence added to evidence that the economy is losing momentum. Also, markets are still pricing in September as the start of the easing cycle. Concurrently, investors are now looking to April inflation data to further guide interest rate expectations.
Gold Price Forecast and Analysis Today:
The decline in gold prices is natural, and the overall trend remains upward. The retracement may provide opportunities to buy again, and currently, the nearest support levels for gold are $2318 and $2285 per ounce, respectively. Conversely, on the same time frame, the daily chart below indicates that returning to the resistance area at $2375 is crucial for bullish movement towards the psychological resistance at $2400 per ounce once more. Evidently, gold prices may continue to move within narrow ranges until reacting to US inflation figures and statements from Federal Reserve policymakers led by Jerome Powell.
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