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Fed Officials Signal Potential Policy Shift Amid Mixed Market Sentiments

3 weeks ago

On Monday, Chicago Fed President Austan Goolsbee remarked that the Fed’s current monetary policy is restrictive but noted that further easing could be possible if inflation continues to slow. Meanwhile, San Francisco Fed President Mary Daly commented that recent inflation data are encouraging but cautioned against assuming the path to sustainable price stability is clear. These statements, coupled with a return of risk flows, weakened the US dollar and allowing gold prices to recover at the expense of the US dollar.

Despite this, gold sellers remained active, driving prices down early Tuesday. Continued US dollar weakness and negative US Treasury bond yields were not enough to sustain gold’s upward momentum, as traders anticipate Friday’s US inflation data for insights into potential Fed rate cuts.

Major banks are now delaying their expectations for a Fed rate cut to December from September, which negatively impacts gold prices. Nevertheless, markets still price in about a 68% chance of a September rate cut.

Concerns over China’s economic recovery also dampen gold’s appeal, given China is the world’s largest gold consumer. Investors are now eyeing comments from Fed officials, including Fed Governors Lisa Cook and Michelle Bowman, set to speak later Tuesday. Additionally, the US Conference Board Consumer Confidence data will attract gold traders’ attention. Meanwhile, end-of-half-year flows could also significantly influence gold price movements.

Gold Technical Outlook:

A daily close below $2,333, now at $2,320, would confirm a pattern failure, reinforcing selling interests. If sellers gain momentum, the initial support area is seen at the $2,310 level, followed by a more significant threshold at $2,300. Breaching this level would put the May 3 low of $2,277 back in focus.

Conversely, for gold to regain bullish traction, it must recapture the confluence zone near $2,335. Further gains could then target the two-week high of $2,366, with buyers aiming for the June 7 high of $2,388.

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