Gold prices (XAU/USD) are fluctuating slightly on Monday, caught between a risk-on environment and bets on potential Fed rate cuts.
Market Dynamics:
- Risk-On Sentiment: Positive risk appetite from Asia reduces safe-haven demand for gold.
- Fed Rate Cut Expectations: Cooler-than-expected US core PCE data on Friday increased the probability of a September Fed rate cut, initially boosting gold prices.
- Uncertainty About Fed Intentions: Despite the data, the Fed’s stance on future rate cuts remains unclear, keeping investors cautious.
Gold’s Recent Performance:
- Temporary Spike on PCE Data: Gold surged briefly after the PCE release but quickly retreated.
- Support for Summer Months: Analysts predict gold to find support during the summer due to:
- Central Bank Rate Cut Considerations: Investors will be weighing future rate cut possibilities.
- Continued Asian Demand: Gold is seen as a hedge against currency depreciation in Asia.
- Technical Analysis Suggests Downtrend: Gold’s recent price action indicates a potential short-term downtrend:
- Breakout of Consolidation Pattern: A breakout of a rectangular consolidation pattern on May 29 signaled a potential downside move.
- Lower Lows: Successive lower lows since the breakout support the bearish trend.
- Downside Targets: Analysts project potential declines towards $2,295 or $2,303.
Overall:
While the initial PCE data triggered a temporary rise in gold prices, the overall outlook remains uncertain. The risk-on environment and unclear Fed intentions are currently pressuring gold. Technically, the indicators suggest a short-term downtrend, but a break above the recent consolidation zone could signal a potential reversal. The long-term outlook for gold is still considered bullish.
