The Gold price lost momentum below the $2,400 barrier on Monday as the People’s Bank of China (PBoC) put a hold on Gold buying for the second month in June. This decision, made by the Chinese central bank, has significant implications for the Gold market, especially since China is the world’s biggest bullion consumer. The pause in Gold buying by China could potentially weigh on the Gold price in the near term.
There is growing speculation that the US Federal Reserve (Fed) will cut interest rates in the third quarter, which might have an impact on the non-yielding Gold price. The expectation of a rate cut from the Fed has increased after the recent employment data, with the markets now pricing in a 77% chance of a rate cut in September. This speculation could influence the movement of the Gold price in the coming weeks.
In addition to the factors affecting the Gold market, there is political uncertainty in France following the results of the French parliamentary elections. The left-wing New Popular Front (NFP) led by Jean-Luc Mélenchon is on track to win the most seats in the second voting round. This political development could potentially boost safe-haven assets like Gold as investors seek refuge from uncertainty.
Technically, the Gold price maintains a bullish trend on the daily chart, holding above the key 100-day Exponential Moving Average (EMA). The precious metal has broken out above a descending trend channel that formed on May 10, indicating a potential upside. The path of least resistance for Gold is towards the upside, with the 14-day Relative Strength Index (RSI) in the bullish zone above the 50-midline.
Price Levels to Watch
On the upside, the first barrier for XAU/USD will be at the $2,400 psychological level, followed by $2,432 and the all-time high of $2,450. On the downside, initial support for Gold is at the $2,330-$2,340 zone, with further support at $2,273, the 100-day EMA. These price levels will be crucial in determining the next move for the Gold price in the short term.
The economic data, including the US Nonfarm Payrolls (NFP) report and the Consumer Price Index (CPI) inflation data, will also play a significant role in influencing the Gold market. The NFP report showed a rise in job numbers in June but also an increase in the Unemployment Rate. Wage inflation dropped slightly, in line with market expectations. These data points will be closely watched by traders for any indications of the Fed’s next move on interest rates.
The Gold market is facing a mix of factors including the decision by China’s Central Bank, speculation about the Fed’s rate cut, political uncertainty in France, and technical indicators. Traders will need to carefully analyze these factors along with the economic data to make informed decisions in the Gold market.