Gold prices lose upwards momentum

Gold prices were uncertain on Monday, as last week’s rally seems to have been halted. Gold traded sideways on Monday, oscillating around $1,954 per ounce. If gold prices increase, resistance may be encountered near $1,983 per ounce, while if gold prices decline, support may be found near $1,893 per ounce.

Gold rallied last week after US inflation data raised market expectations that the US Federal Reserve is nearing the end of its tightening cycle. Increases in central banks’ interest rates put pressure on gold prices since assets yielding interest become a more appealing investment compared to gold as interest rates rise. Gold prices edged lower on Monday, however, losing last week’s upwards momentum.

Gold prices have been predominantly directed by the dollar’s movement, as the competing gold typically loses appeal as an investment when the dollar rises. The dollar remained weak on Monday, with the dollar index hovering below the 100 level. US Treasury yields declined on Monday, with the US 10-year bond yielding 3.81%.

US inflation slowed more than expected in June, weighing the dollar down and boosting gold prices. The U.S. Federal Reserve kept its interest rate steady at its June policy meeting for the first time in well over a year to a target range of 5.00% to 5.25%. 

The Fed has signaled that its tightening cycle is not over yet, however, and market odds are in favor of another rate hike in July after June’s pause. Even though US inflation cooled to 3% in June, dropping close to the Fed’s 2% goal, most analysts expect another 25-bp rate hike in July. There is, however, doubt on whether the Fed will continue hiking rates after July’s rate increase or whether July’s rate hike will be the last one this year.

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Written by:
Myrsini Giannouli

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