Gold retreats from risk-free sentiment and lowers US yields

Gold falls 0.90% on widespread commodity pressure.
U.S. Treasury yields fall seven basis points, but the dollar gains marginally, with DXY up 0.04% to 104.08.
US JOLTS data reached the lowest level in three years, showing an economic slowdown and lower-than-estimated orders for strong goods.

Gold prices fell about 0.90% during Tuesday’s North American session amid risk-off momentum and despite falling U.S. Treasury yields. The latest tranche of macroeconomic data from the US shows that the economy is slowing down, which justifies lowering interest rates. Despite this, the XAU/USD trade is loss-making and trades at $2,328.

The gold metal fell below $2,350 per troy ounce due to a significant decline in commodity prices. Oil prices have previously been under intense pressure on concerns that the global economy may be growing at a slower pace, which could reduce demand for oil.

U.S. Treasury yields, which typically correlate inversely with gold prices, also fell seven basis points on the 10-year U.S. Treasury yield.

In opposition to the US dollar, there is a marginal augment of 0.04% in the US dollar index (DXY). DXY tracks the dollar against a basket of six currencies and rises to 104.08.

On the data side, the US economic report included the release of April JOLTS and strong goods orders data. Reports show that the economy remains resilient, although delicate in the face of higher borrowing costs set by the US Federal Reserve (Fed).

Following the release of the data, the December 2024 Federal Funds Rate Futures contract showed that most investors expect interest rate cuts of at least 36 basis points via the Chicago Board of Trade (CBOT).

As a result, U.S. Treasury yields fell and the dollar extended its losses to three days in a row.

Daily Market Change Summary: Gold price falls as U.S. Treasury yields fall

Tuesday’s U.S. economic report included JOLTs job vacancies, which fell from 8.355 million to 8.059 million in April, lower than the estimated 8.34 million.
US strong goods orders rose 0.6% m/m in April, below both estimates and the previous reading of 0.7%.
Last week, the US Core Consumer Expenditures Price Index (PCE), the Fed’s preferred measure of inflation, stabilized, boosting hopes for potential interest rate cuts.
Meanwhile, business activity showed mixed results, with the S&P Global Manufacturing PMI rising and the Institute for Supply Management (ISM) Manufacturing PMI falling for the second consecutive month.
According to the CME FedWatch Tool, investors currently estimate the probability of a rate cut at 54.9%.
This week’s US economic report will show the change in ADP employment ahead of Friday’s release of nonfarm payrolls data.

Technical Analysis: Gold price drops below $2,350

Gold remains high, although spot prices have fallen below the 50-day basic moving average (SMA) of $2,334. Price action and a change in momentum in favor of sellers could pave the way for a pullback. The relative strength index (RSI) turned bearish below the 50 midline, opening the door to further gold losses.

Once XAU/USD breaks below the 50-day basic moving average (SMA) at $2,334, it could pave the way for it to break the May 8 low of $2,303 and then the May 3 cycle low of $2,277.

Further gains are ahead if XAU/USD buyers recover to $2,350. Next up will be $2,400, followed by a year-to-date high of $2,450 and then $2,500.