Gold prices saw a slight decline on Monday, pressured by a firm U.S. dollar as investors awaited comments from Federal Reserve officials and key economic data to gauge the future trajectory of U.S. interest rates. Spot gold decreased by 0.3% to $2,419.79 per ounce, while U.S. gold futures edged down by 0.2% to $2,424.90.
The dollar strengthened following an attempted assassination of former President Donald Trump, which increased his chances of winning the upcoming election. A stronger dollar typically makes gold more expensive for holders of other currencies, influencing its price.
"I'm not convinced a Trump victory or loss directly links to a binary outcome for gold's direction in the same way Fed policy expectations have been. But if Trump stirs up trade wars, then you'd think it builds a good case for gold to perform well under his presidency," said Matt Simpson, senior analyst at City Index.
Federal Reserve Chair Jerome Powell is scheduled to speak later in the day, with additional comments from other officials expected throughout the week. Investors will be closely monitoring these events, along with upcoming data sets including U.S. retail sales, industrial output for June, and weekly jobless claims. Ilya Spivak, head of global macro at Tastylive, commented, "If we get another big miss on retail sales, it will reinforce there is a sense of urgency to cut rates, which could help gold. If gold breaks the $2,450 barrier, then prices will see new record highs."
Market participants are currently pricing in a 93% chance that the Fed will cut rates in September, according to the CME Fedwatch Tool. The appeal of non-yielding bullion typically increases in a low-interest-rate environment.
Adding to the economic uncertainties, China's economy slowed in the second quarter, keeping expectations alive that Beijing will need to introduce more stimulus. Spot silver added 0.1% to $30.79 per ounce, platinum gained less than 0.1% at $998.993, and palladium dropped 0.2% to $967.09.
The gold price extended its decline during the early European session on Monday. Despite this, the metal remains close to its highest level since May 22, buoyed by dovish Federal Reserve expectations. Market participants are convinced that the Fed will begin cutting interest rates in September, acting as a tailwind for gold.
Further supporting gold prices is the expectation that the Fed will lower borrowing costs again in December. This expectation has prevented the U.S. dollar from capitalizing on its modest recovery gains from a recent three-month low. Additionally, political uncertainty following the assassination attempt on Trump and China's economic woes contribute to the near-term positive outlook for gold.
The U.S. Dollar has attracted some buyers on Monday, reversing part of its recent losses. This exerted some pressure on gold prices for the second straight day. Data published by the U.S. Bureau of Labor Statistics showed that the Producer Price Index (PPI) for final demand rose by 2.6% on a yearly basis in June, above consensus estimates of 2.3%.
The National Bureau of Statistics reported on Monday that China's economy expanded by 4.7% in the second quarter of 2024 compared to a 5.3% expansion in the first quarter. This data points to heightened economic uncertainty, overshadowing the slightly better-than-anticipated release of Industrial Production figures, which came in at 5.3% year-on-year versus 5.0% estimates.
From a technical perspective, the emergence of some dip-buying on Friday reaffirmed strong support near the $2,390-$2,388 resistance breakpoint. Oscillators on the daily chart remain in positive territory and are still away from being in the overbought zone, suggesting that the path of least resistance for gold prices is to the upside. Hence, a slide back below the $2,400 mark might still be seen as a buying opportunity and remain limited.
Some follow-through selling could potentially drag gold prices to the $2,358 region with some intermediate support near the $2,372-$2,371 area. The subsequent fall might expose the 50-day Simple Moving Average (SMA) support, currently pegged near the $2,350 region.
