Gold remains stable despite the increase in the US Dollar and Treasury yields, as the precious metal advances late on Monday with minimal Greenback gains amid softer-than-expected US economic data. The XAU/USD is trading near $2,331, up 0.23%, taking into consideration the upcoming Independence Day in the US and a week full of events.
In the US, manufacturing data showed mixed results with the S&P Global Manufacturing PMI expanding while the ISM Manufacturing PMI continued to contract for the third consecutive month in June. Market participants remained cautious with US equity indices displaying mixed performances during the mid-North American session. Additionally, the US 10-year Treasury yield surged nearly nine basis points to 4.489%, supporting the Greenback’s rebound.
The focus now shifts to Federal Reserve Chairman Jerome Powell’s speech on Tuesday, followed by the release of the Fed’s latest monetary policy minutes on Wednesday. The coming days will also see the release of Services PMIs from S&P and the ISM with Friday bringing the highly anticipated US Nonfarm Payrolls report.
Technical analysis indicates that Gold prices continue to move in an upward direction, hovering near the Head-and-Shoulders neckline between $2,320 and $2,350. The neutral momentum, however, as indicated by the RSI at its 50-neutral line, suggests a balance between buyers and sellers. A bearish continuation would require prices to drop below $2,300 with potential support levels at $2,277 and $2,222. On the other hand, a bullish scenario could see prices surpass $2,350 towards resistance levels at $2,387 and $2,400.
The Federal Reserve plays a crucial role in shaping monetary policy in the US, with the dual mandate of achieving price stability and fostering full employment. Interest rate adjustments are the primary tool used by the Fed to achieve these goals. In situations where inflation rises above the 2% target or unemployment is high, the Fed may raise or lower interest rates accordingly, impacting the strength of the US Dollar.
The Federal Reserve conducts eight policy meetings a year, where the Federal Open Market Committee (FOMC) evaluates economic conditions and makes monetary policy decisions. The FOMC consists of twelve Fed officials, including the Board of Governors members and regional Reserve Bank presidents. In extreme circumstances, the Fed may resort to Quantitative Easing (QE) to increase credit flow during financial crises or low inflation periods. Conversely, Quantitative Tightening (QT) involves the reversal of QE, which can be positive for the value of the US Dollar.
