- Gold futures plunged at the end of the first trading week of June, supported by a hotter-than-expected U.S. jobs report that pushed up U.S. Treasury yields and the U.S. dollar.
- As a result, the price of the yellow metal is now headed for a weekly loss and may face difficulty returning to the $2,400 level.
- Especially, if U.S. inflation comes in higher than expected this week.
According to gold trading platforms, gold prices fell to a support level of $2,286 per ounce on Friday, resulting in a weekly price movement of -0.5%, narrowing its year-to-date gain to less than 13%. Gold prices are now trading at their lowest level in two weeks. Currently, gold is trading around $2,295 per ounce. Similarly, silver prices, gold's sister metal, fell to $29.785 per ounce. As a result, the white metal has recorded a weekly loss of about 2.5% but is still up 24% year-to-date.
According to the results of the economic calendar, and according to the Bureau of Labor Statistics (BLS), the U.S. economy added a total of 272,000 new jobs in May, up from a revised-down 165,000. This was above economists' expectations of 185,000. The unemployment rate in the country rose from 3.9% to a higher-than-expected 4%. Also, average hourly earnings rose 0.4% on a monthly basis and 4.1% on an annual basis. Furthermore, the labor force participation rate fell to 62.5%, while average weekly hours worked remained unchanged at 34.3.
In general, financial markets were mixed after the employment data, as major indices reversed their losses before the market opened and turned positive after the opening bell. In addition, the US dollar and US Treasury bond yields rose significantly to end the trading week.
According to reliable trading platforms, the U.S. Dollar Index (DXY), a measure of the U.S. currency against a basket of other major currencies, was trading at 105.22 at the time of writing. Previously, the index had posted a weekly gain of 0.1%, adding to its year-to-date gains of around 3.4%. As you know, a stronger U.S. dollar is bad for dollar-denominated commodities because it makes them more expensive for foreign investors to buy.
Other factors affecting the gold market
Bond yields rose across the board, with the 10-year Treasury yield rising 14.7 basis points to 4.428%. Also, the 2-year yield rose 13.9 basis points to 4.859%, while the 30-year yield rose 12.1 basis points to 4.551%. Obviously, Gold is sensitive to rising interest rates because it can affect the opportunity cost of holding the non-yielding bullion.
Overall, investors are concerned that the strong U.S. jobs report could deter the Federal Reserve from cutting interest rates sooner. According to the CME FedWatch tool, the futures market is pricing in a quarter-point rate cut in September or November. However, conditions could change quickly as the Consumer Price Index (CPI) will be released this week, and a lower reading could ignite a bearish sentiment.
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Gold Price Forecast and Analysis Today:
According to the daily chart performance above, the overall downward trend continues. The bearish momentum has intensified, pushing the price below $2,300 per ounce. Now, gold is entering potential buying zones, which will depend on how markets and investors react to the upcoming U.S. inflation data this week, as well as the tone of the Federal Reserve’s policy statement and comments from its Chairman, Jerome Powell. Technically, the closest low-risk buying levels for gold are at $2,267 and $2,250 per ounce. Conversely, on the same timeframe, the bulls will regain control if the price returns to the resistance level of $2,355 per ounce. Finally, we still favor buying gold at every dip.
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