Forex Signal Bullish

Gold lingers near one-month high on Fed rate-cut bets

On Monday, gold prices modestly declined but remained in proximity to a peak not seen in over a month, attained during the previous session. This movement followed tepid U.S. economic data, which bolstered anticipations of a Federal Reserve interest rate reduction come September.

As of 0235 GMT, spot gold saw a minor descent of 0.2%, trading at $2,385.88 per ounce, subsequent to its ascension to the highest point since May 22 on Friday. Concurrently, U.S. gold futures experienced a slight dip of 0.1%, settling at $2,394.50.

Friday’s data revealed an unemployment rate escalating to a 2-1/2-year zenith of 4.1%, indicative of a loosening labor market. This week’s market attention is riveted on Fed Chair Jerome Powell’s biannual Congressional testimony, alongside remarks from various Fed officials and U.S. inflation metrics.

The subdued jobs report on Friday contributed to gold prices experiencing their most favorable week in three months. According to Matt Simpson, a senior analyst at City Index, a subdued U.S. inflation report coupled with dovish undertones from Powell’s testimony could serve as the quintessential catalyst for gold to contemplate new zeniths.

Market participants are currently pricing in a 78% probability of a September rate reduction by the Fed, as per CME’s Fedwatch Tool. Additionally, traders are factoring in an increasing likelihood of a secondary rate cut in December.

Reduced interest rates diminish the opportunity cost of holding non-yielding bullion.

Nevertheless, bullion prices faced constraints due to revelations that China’s central bank, a leading consumer, abstained from augmenting its gold reserves for the second consecutive month in June.

“China may have halted their gold acquisitions, but the demand persists broadly. This scenario is poised to maintain gold on bullish watchlists, enticing bullish wagers on any price dips,” Simpson remarked. Spot silver declined by 0.2% to $31.14 after reaching a one-month apex in the preceding session. Platinum dipped by 0.5% to $1,021.45, and palladium decreased by 1.7% to $1,008.51.