Gold Declines Amid Steady US Yields and Weak Dollar

Gold prices dropped by 0.28% following remarks from Federal Reserve Chair Jerome Powell at a European Central Bank forum. Powell expressed cautious optimism about reducing inflation but stressed the need for more progress before considering rate cuts.

Despite Powell’s comments, US Treasury yields remained stable, and the US Dollar fluctuated within its usual range. The price of gold, trading at $2,324, fell during the North American session as investors processed Powell’s statements.

Powell noted that the process of reducing inflation has resumed but emphasized the importance of further progress before cutting interest rates. He stated, “Given the strength of the US economy and labor market, we can afford to take our time and get this right.” He also mentioned that the risks associated with the Fed’s dual mandate have become more balanced and need careful management.

US job data showed a surprising increase in job vacancies, indicating a strong labor market despite high interest rates of 5.25%-5.50% set by the Fed. More data is expected on Wednesday, including the Federal Open Market Committee’s (FOMC) last meeting minutes and service sector PMIs from S&P Global and the Institute for Supply Management (ISM).

US markets will be closed on Thursday for Independence Day, with traders focusing on June’s Nonfarm Payrolls (NFP) report on Friday.

Daily market movers: Gold prices fell below $2,330 due to strong job openings data. The US Bureau of Labor Statistics reported 8.14 million job vacancies in May, surpassing forecasts and April’s 7.919 million, the lowest in three years. US manufacturing activity showed mixed results, and traders are now looking forward to service sector data on Wednesday.

According to the CME FedWatch Tool, the likelihood of a 25-basis-point Fed rate cut in September has increased to 63%, up from 58% on Monday. The December 2024 fed funds rate futures contract suggests the Fed will ease policy by just 36 basis points by the end of the year.

Technical analysis: Gold prices are fluctuating near the Head-and-Shoulders neckline around $2,320-$2,350. Although the chart pattern is bearish, momentum has turned neutral, with the Relative Strength Index (RSI) nearing its 50-neutral line, indicating a balance between buyers and sellers.

For a bearish continuation, sellers need to push prices below $2,300. If successful, the next support levels would be the May 3 low of $2,277 and the March 21 high of $2,222. Further declines could target the Head-and-Shoulders pattern objective between $2,170 and $2,160.

On the other hand, if buyers break through $2,350, they would aim for key resistance levels, such as the June 7 cycle high of $2,387, eventually targeting the $2,400 mark.