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Gold Declines As The People's Bank of China Kept Its Buying On Hold For The Second Month

08 Jul,2024
Gold Declines As The People's Bank of China Kept Its Buying On Hold For The Second Month

- Gold prices surged by over 1.1%, reaching nearly $2,392, driven by mixed US Nonfarm Payroll data and increased speculation about a potential Federal Reserve rate cut.

- June's US Nonfarm Payrolls data were positive. Downward revisions for April and May indicated that the U.S. economy added 111K fewer jobs than initially reported. As a result, the unemployment rate increased by one-tenth of a percentage point in June, surpassing expectations. 

- Spot Gold price fell from its highest level in a month at the beginning of the current trading week. Traders are waiting for more evidence this week to ensure the future of U.S. interest rate cut, on top of which is the testimony of the Federal Reserve Chairman "Jerome Powell" and the main inflation data scheduled for the week.

- The spot price of gold decreased by 0.5 % to $2,376.68 an ounce. Gold seized strong gains last week, as a large group of weak readings in the labor market led to more optimism about reducing interest rates.

- The yellow metal lost its long momentum as the Chinese People's Bank kept buying gold for the second month in June, according to the official data issued on Sunday. It should be noted that China is the largest buyer in the world, and then the temporary stopping of gold on its prices negative.

- The prices of yellow metal were about to penetrate over $2,400 an ounce, amid increasing conviction that the Federal Reserve may begin to cut interest rates in September.

- Gold also benefited from the decline in the U.S. dollar, which recorded its lowest level in about a month at 104.82. 

- The yellow metal benefits from low interest rates, which are expected to liberate more liquidity and reduce the gravity of the dollar and treasury bonds.

- The CME Fedwatch tool showed that traders are now calculating an opportunity for more than 72% that the Federal Reserve cut interest rates by 25 basis points in September, up from 59 % seen last week. Focus this week is on more signals on the U.S. economy and monetary policy. Powell is set to offer a two-day testimony before the Senate and the House, potentially shedding more light on the Fed’s plans for interest rates.

- Consumer price index inflation data is also focused on this week and will likely affect the Fed's expectations on interest rates. Gold prices still seem to be somewhat high, and the People's Bank of China awaits further decline before resuming its gold-buying program. 

- On the other hand, platinum futures fell 0.6% to $1,039.25 an ounce, while silver futures fell 1% to $31.370 an ounce.

Gold's Technical Analysis

- Gold fell from its highest monthly level at $2,392 at the beginning of the week. The yellow metal seeks to maintain the upward trend and touch the resistance level of the $2,400 mark. If gold fails to break the level of $2,391, it will decline to the support level of $2,372, followed by the level of $2,365 then the level of $2,345. The extended losses may witness a decrease to 
$2,300.

- On the flip side, if gold closed H4 above the resistance level of $2,391, it may continue its long momentum to the level of $2,410, then re-testing ATH level ever at $2,450 touched in May.

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