Gold (XAU/USD) price retreats by some 0.50% on Monday as the Greenback remains steady despite traders repricing a less hawkish Federal Reserve (Fed) following last Thursday’s softer-than-expected jobs report. The XAU/USD pair trades at $4,153, down 0.50%.
XAU/USD retreats as steady Dollar and yields cap recovery
Data from the US showed that business activity in the services sector was modestly softer than expected, with the ISM Services PMI dipping from 54.5 to 54. Even though the data indicated a slowdown, the Employment Index improved, while a measure of producer prices slowed from 71.3 to 67.7.
Monday’s data outweighed June’s Nonfarm Payrolls report, which fell short of expectations, and the April and May data, revised lower, an indication of further deterioration.
Traders? trimmed Fed hawkish bets. As of writing, they are expecting an 88% chance of a rate hike at the December meeting, as they priced in 22 basis points of tightening.
For the July meeting, money markets expect the Fed to hold rates unchanged, with odds at 77%, according to Prime Terminal data.
Bullion weighed by high US yields, strong US Dollar
In the meantime, the US Dollar Index (DXY), which tracks the buck’s value against six currencies, is up 0.03% at 100.90, a headwind for the non-yielding metal. Also, US Treasury yields are steady, with the 10-year benchmark note yielding 4.451%, unchanged.
Geopolitics had fallen to the background as the second round of talks between the US and Iran in Islamabad was set to start next Saturday. Remaining issues include Iran’s nuclear program, frozen assets, the Strait of Hormuz, and Lebanon.
Aside from this, the US economic docket will feature the Fed’s last meeting minutes, followed by Initial Jobless Claims for the week ending July 4, as traders brace for July 14 Consumer Price Index (CPI) figures.
XAU/USD technical outlook: Gold stays bearish, fails to clear $4,200
Gold price downtrend is intact as long as XAU fails to clear a downtrend-resistance trendline at around $4,200-$4,225. Additionally, a 'death-cross' has formed on the daily chart, suggesting sellers have overtaken buyers and opening the door to further losses.
The Relative Strength Index (RSI) is bearish, despite aiming towards its 50-neutral level. However, during the last two trading sessions, it opened the door for further downside.
If XAU/USD drops below $4,200, the next support would be the psychological $4,100, before testing $4,000 and the year-to-date (YTD) low at $3,941.
For a bullish reversal, Gold needs to decisively clear $4,250 before testing $4,300. Overhead lies the 50-day Simple Moving Average (SMA) at $4,391, followed by the 200-day SMA at $4,488, ahead of $4,500.
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