Gold (XAU/USD) retreated by approximately 0.50% on Monday, trading at $4,153, as the US Dollar remained steady and US Treasury yields held firm, capping gold's post-Nonfarm Payrolls (NFP) rebound [1]. The US Dollar Index (DXY) was up 0.03% at 100.90 according to one source [1], while another reported it trading around 100.92 after easing from an intraday high of 101.14 [2]. The softer-than-expected US NFP report last Thursday, along with downward revisions to April and May data, led traders to trim expectations for further Federal Reserve (Fed) tightening [1][2]. According to Prime Terminal data, there is an 88% chance of a rate hike at the December Fed meeting, with 22 basis points of tightening priced in, while the probability of a rate hike at the July meeting stands at 23% [1]. The CME FedWatch Tool shows a 77% probability that the Fed will keep rates unchanged at this month's meeting, and the probability of a September rate hike has fallen to 56% from 63% before the jobs report [2].
US economic data showed the ISM Services PMI dipped from 54.5 to 54, indicating a modest slowdown in business activity, though the Employment Index improved and producer prices slowed from 71.3 to 67.7 [1]. Another source noted the PMI reading of 54 in June was in line with expectations and marked the 23rd consecutive month of expansion [2]. Despite easing inflation risks due to lower oil prices and improved shipping through the Strait of Hormuz following last month's interim peace agreement between the US and Iran, inflation remains above the Fed's 2% target, and policymakers are committed to bringing it back to target, suggesting monetary policy will remain restrictive for now [2].
Geopolitical risks have receded, with the second round of US-Iran talks set to start next Saturday in Islamabad. Outstanding issues include Iran's nuclear program, frozen assets, the Strait of Hormuz, and Lebanon [1][2]. Oil prices have unwound their previous rally, further easing inflation concerns [2].
From a technical perspective, gold remains in a downtrend, failing to clear resistance at $4,200-$4,225, with a 'death-cross' on the daily chart signaling potential for further losses. The next support levels are $4,100, $4,000, and the year-to-date low at $3,941. A bullish reversal would require a decisive move above $4,250, with further resistance at the 50-day SMA ($4,391) and 200-day SMA ($4,488) [1].
Looking ahead, the US economic calendar features the ADP Employment Change report, weekly Initial Jobless Claims, and the release of the FOMC meeting minutes, which investors will monitor for further clues on the Fed's policy outlook [1][2].
CONCLUSION
Gold prices have come under pressure as the US Dollar and Treasury yields remain firm, despite fading Fed rate hike bets following softer US jobs data. While easing geopolitical risks and lower oil prices have reduced inflation concerns, the Fed's commitment to restrictive policy continues to limit gold's upside. Market participants are now focused on upcoming US economic data and Fed communications for further direction.