• Gold rolls over after retesting key resistance as the outlook for US interest rates remains elevated. 
  • This keeps the opportunity cost of holding non-yielding Gold high, making it less attractive to investors. 

Gold (XAU/USD) is down by a quarter of a percent on Tuesday after encountering resistance at $2,315, which previously acted as a support level. This rejection is due to rising expectations for interest rates in the US, which are affecting the precious metal.

The release of better-than-expected US jobs data last Friday indicated ongoing inflationary pressures. As a result, there’s less likelihood that the US Federal Reserve (Fed) will decrease interest rates in September. Maintaining higher interest rates raises the opportunity cost of holding gold, making it less appealing to investors.

The positive employment data has led to a reevaluation of US interest-rate expectations, with the Fed now expected to keep rates elevated for a longer period. Market expectations for a rate cut in September have decreased from over 67% to just over 50% after the Nonfarm Payrolls (NFP) release, according to the CME FedWatch tool.

Despite this, the global outlook for interest rates remains subdued, which supports gold. Last week, the Bank of Canada (BoC) and the European Central Bank (ECB) both cut their overnight rates by 0.25%. Additionally, lower inflation data in Switzerland has raised speculation about a potential interest rate cut by the Swiss National Bank (SNB) at its upcoming meeting on June 20.

Gold traders are now awaiting further guidance from the Federal Reserve’s June meeting, scheduled to conclude on Wednesday, as well as the release of US Consumer Price Index (CPI) data for May on the same day.

In technical analysis, gold has retraced to test the $2,315 level before turning lower. The precious metal is currently in a short-term downtrend and is likely to continue moving downwards. The next support levels to watch are around $2,285 and $2,279.

In summary, gold is facing downward pressure due to changing interest rate expectations, but global interest rate trends and upcoming economic data could provide further direction for the precious metal.

By Admin

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