Gold Price Forecast: XAU/USD attracts some sellers below $2,350 ahead of US PMI data
■Gold prices trades in negative territory near $2,325 in Monday’s early Asian session.
■Inflation in the US eased to its lowest annual rate in more than three years.
■The Middle East geopolitical tensions and the political uncertainty of France’s parliamentary election drag the Greenback lower.
Gold prices (XAU/USD) edges lower to $2,325 on Monday during the early Asian trading hours. The precious metal loses ground amid a continuation of the Federal Reserve’s (Fed) cautious stance. Investors will keep an eye on the US June ISM Purchasing Managers Index (PMI), which is expected to improve to 49.0 in June from 48.7 in May.
The US Personal Consumption Expenditures (PCE) Price Index readings fell as expected but remain elevated, triggering the US Fed to maintain its cautious stance. Data released from the US Bureau of Economic Analysis on Friday showed that the headline US PCE rose 2.6% on a yearly basis in May, compared to 2.7% in April, in line with the market estimation. Meanwhile, the core PCE inflation increased 2.6% YoY in May from 2.8% in April, matching expectations.
The Federal Reserve Bank of San Francisco President Mary Daly said on Friday that monetary policy is working, but it’s too early to tell when it will be appropriate to cut the interest rate. Daly further stated, "If inflation stays sticky or comes down slowly, rates would need to be higher for longer.” It’s worth noting that a higher interest rate generally weighs on the Gold price as it increases the opportunity cost of holding non-yielding assets.
Additionally, the Federal Reserve Bank of New York President John Williams said that inflation is still at problematic levels and the US central bank will act to lower it. The Fed Governor Michelle Bowman noted that while current Fed policies should be enough to drag inflation back to target, adding that the central bank shouldn't be unwilling to weigh further rate cuts in inflation data proves sticky.
Nonetheless, the ongoing geopolitical tensions and the uncertainty after the first round of France’s parliamentary election might boost the safe-haven flows and drag the Greenback lower, per CNN.
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