Gold prices saw minimal movement during the North American session due to low trading volume. This was attributed to the Juneteenth holiday. However, data from the US indicated a slowing economy, which raised expectations for a rate cut by the Federal Reserve. As a result, precious metals managed to regain some ground, with XAU/USD trading at $2,328 at the time of reporting.
US Retail Sales figures for May showed improvement compared to April, but were revised downward, suggesting a possible economic slowdown. Additionally, Industrial Production numbers for May also saw an increase, following a downward revision in April. These factors contributed to a growing anticipation of a rate cut in September.
The CME FedWatch Tool indicated a 67% chance of a 25 basis points rate cut in September, up from 61% the previous day. Moreover, futures contracts for December 2024 implied a total of 36 bps of easing by the end of the year.
Federal Reserve officials commented on inflation, stating that they needed more evidence of sustained inflation growth to meet their 2% core inflation target. Treasury bond yields in the US remained subdued, with the 10-year Treasury note yield dropping to 4.215%.
In terms of market movers, the US Dollar Index (DXY) remained flat at 105.25, which supported Gold prices. Despite positive US Retail Sales data, the Greenback was not significantly impacted, partly due to a strong Industrial Production report.
From a technical analysis perspective, Gold prices exhibited a bearish bias, with a Head-and-Shoulders pattern signaling a potential decline towards $2,200. However, if Gold breaks above $2,350, it could face resistance levels at $2,387 and $2,400.
Interest rates play a crucial role in influencing Gold prices. Higher interest rates generally strengthen a country’s currency, making it more attractive for global investors. However, high interest rates also increase the opportunity cost of holding Gold, as it does not offer any interest-bearing returns. Therefore, Gold prices tend to decline when interest rates are high.
The Fed funds rate, set by the Federal Reserve at its FOMC meetings, is a key indicator that shapes market expectations for future monetary policy decisions. The CME FedWatch tool tracks these expectations, influencing how financial markets respond.
Overall, the outlook for Gold prices remains uncertain, with various economic indicators and Federal Reserve policies playing a significant role in determining the precious metal’s value in the coming months. Traders and investors will closely monitor upcoming data releases and central bank statements for further insights into the market.