GOLD Consolidates Within Range, Rejection at $1,970 - 61.8% FIBO
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Gold is currently experiencing a period of consolidation, trading within a specific range. However, it faced a notable rejection near the $1,970 price level, coinciding with the 61.8% Fibonacci retracement level. This Fibonacci level is a significant technical indicator that traders often monitor for potential reversals or strong resistance.
During this consolidation phase, the price of gold has been unable to sustain a breakthrough above the $1,970 level, suggesting selling pressure or a lack of bullish momentum in the market. As a result, the precious metal remains within its current range, potentially awaiting further market catalysts or a decisive move in either direction.
The modest rise in US government bond yields has prompted some buying interest in the US Dollar (USD) on the final day of the week, allowing it to recover from its overnight decline, which was the lowest since May 24. This has become a hindrance for gold, priced in USD, as a stronger dollar tends to suppress its value. However, the impact is being somewhat mitigated by the prevailing risk-averse sentiment, which favors safe-haven assets like gold.
Concerns about a potential global economic downturn persist, fueled by disappointing Chinese inflation data released earlier today. The National Bureau of Statistics reported a 0.2% contraction in China's Consumer Price Index (CPI) for May, while the Producer Price Index (PPI) experienced its sharpest decline since February 2016, dropping 4.6% YoY. These figures underscore the slower post-COVID recovery in the world's second-largest economy, reinforcing gold's appeal as a safe-haven asset.
Gold is also receiving support from expectations that the Federal Reserve (Fed) will refrain from raising interest rates at its upcoming June 13-14 meeting. This sentiment has curbed the bullish momentum of the USD and has provided a tailwind for gold, which does not offer a yield. In fact, market participants have fully priced in a temporary halt to the Fed's rate hike cycle. This belief was reinforced by last week's US data, revealing a surge in Initial Jobless Claims to a 20-month high.
Attention turns to next week's crucial FOMC meeting
Nevertheless, futures tied to Fed funds suggest the possibility of a 25 basis point rate increase at the July meeting of the Federal Open Market Committee (FOMC). As a result, traders are cautious about taking aggressive bullish positions on gold, particularly in the absence of significant economic data that could sway the market. Investors are likely to stay on the sidelines, awaiting the release of the latest US consumer inflation figures and the outcome of the FOMC meeting next week.
During this consolidation phase, the price of gold has been unable to sustain a breakthrough above the $1,970 level, suggesting selling pressure or a lack of bullish momentum in the market. As a result, the precious metal remains within its current range, potentially awaiting further market catalysts or a decisive move in either direction.
The modest rise in US government bond yields has prompted some buying interest in the US Dollar (USD) on the final day of the week, allowing it to recover from its overnight decline, which was the lowest since May 24. This has become a hindrance for gold, priced in USD, as a stronger dollar tends to suppress its value. However, the impact is being somewhat mitigated by the prevailing risk-averse sentiment, which favors safe-haven assets like gold.
Concerns about a potential global economic downturn persist, fueled by disappointing Chinese inflation data released earlier today. The National Bureau of Statistics reported a 0.2% contraction in China's Consumer Price Index (CPI) for May, while the Producer Price Index (PPI) experienced its sharpest decline since February 2016, dropping 4.6% YoY. These figures underscore the slower post-COVID recovery in the world's second-largest economy, reinforcing gold's appeal as a safe-haven asset.
Gold is also receiving support from expectations that the Federal Reserve (Fed) will refrain from raising interest rates at its upcoming June 13-14 meeting. This sentiment has curbed the bullish momentum of the USD and has provided a tailwind for gold, which does not offer a yield. In fact, market participants have fully priced in a temporary halt to the Fed's rate hike cycle. This belief was reinforced by last week's US data, revealing a surge in Initial Jobless Claims to a 20-month high.
Attention turns to next week's crucial FOMC meeting
Nevertheless, futures tied to Fed funds suggest the possibility of a 25 basis point rate increase at the July meeting of the Federal Open Market Committee (FOMC). As a result, traders are cautious about taking aggressive bullish positions on gold, particularly in the absence of significant economic data that could sway the market. Investors are likely to stay on the sidelines, awaiting the release of the latest US consumer inflation figures and the outcome of the FOMC meeting next week.
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