Buoyed by Rate Cut Expectations
After the Bank of Canada and the European Central Bank (ECB) cut rates earlier this week, spot gold rose to $2,387 on Friday, reaching the highest level since May 22. However, the metal experienced a sharp decline following a robust US nonfarm payroll report, closing with a loss of 3.49% at $2,294. It fell nearly 1.40% for the week.
Dollar Index and Yields
The Dollar Index has been weakening due to rising Fed rate cut expectations and healthy risk appetite. Despite this, a strong US nonfarm payroll report led to the Index surging on Friday, closing with a gain of 0.70% at 104.93 and a weekly gain of 0.25%.
The 10-year US yields tested 4.271% on Friday, the lowest level since April 1. However, a sharp decline in US bonds occurred following the strong job report. The ten-year US yields closed with a gain of 3.28% at 4.43%, although they were down nearly 1.75% for the week. The 10-year yields could potentially test the resistance at 4.50% in the near term, which may have a bearish effect on the price of gold. Additionally, the 2-year US yields surged over 3% on Friday, closing at 4.89%.
Data and Events Round-Up
The Bank of Canada and the European Central Bank (ECB) cut rates earlier in the week. While the ECB did not provide clear guidance for further rate cuts, it is likely to proceed on a case-by-case basis. US data released during the week ending June 7 indicated that the US economy is still performing reasonably well. Various economic indicators showed mixed results, with some figures meeting forecasts and others falling short.
Fed Rate Cut Bets
Following the solid nonfarm payroll report, traders have adjusted their expectations for a rate cut from July to September. This shift is reflective of the changing economic landscape and data releases.
Data and Events Next Week
Major US data releases expected next week include CPI, PPI, University of Michigan sentiment, and inflation expectations, culminating in the US Federal Reserve’s monetary policy decision. Observers will be keen to look for clues on potential rate cuts, especially given recent actions by other central banks and concerning US economic data.
China’s Central Bank Pauses Gold Buying
Data revealed that China’s Central Bank did not purchase any gold last month, breaking an 18-month streak of continuous buying. This pause is likely due to high gold prices, with a potential resumption of buying as prices fall. This halt in purchasing is currently considered bearish for the metal.
ETF
Total known Global gold ETF holdings reached a six-week high of 81.034 Moz as of June 6, indicating sustained investor interest in gold.
Weekly Outlook
Expectations suggest that spot gold may trade with a bearish bias due to rising yields and China’s halt in gold buying. The metal could test support levels at $2,277 in the near term, with potential short covering ahead of key events like the US FOMC monetary policy decision and CPI data releases. Investors are likely to see dips as buying opportunities, particularly for medium to long-term positions.
Additional Insight: Rise in the US unemployment rate and other central banks cutting rates are positive indicators for gold. Central banks continue to buy gold at a healthy pace, and a potential return to buying by the Chinese Central Bank is anticipated as prices decline from previous highs. The delayed rate cut is not canceled, and fundamentals remain constructive for gold as a safe-haven asset.
By incorporating relevant subheadings and additional insight, the rewritten article provides a more comprehensive view of factors impacting the price of gold and market expectations moving forward.
:max_bytes(150000):strip_icc()/GettyImages-2153440615-49b9ea34da0e4b8bb54938f9e7589d56.jpg "Gold and Gold Stocks Decline Due to Strong US Jobs Data, Impacting Rate-Cut Expectations")
