The gold price is falling due to sturdy yields in the US, sturdy USD after solid data from the USA

Gold reverses gains after hitting an intraday high of $2,368, down over 1.70%.
Strong data from the American agency S&P Global PMI strengthen the US dollar, and DXY increases by 0.14% to 105.80.
Mixed economic data from the US keeps speculation about Fed interest rate cuts alive.

Gold prices reversed course on Friday, falling by more than 1.70%. Economic data from the United States (US) prompted investor reaction to price in fewer interest rate cuts by the Federal Reserve (Fed) due to the good health of the economy. XAU/USD is trading at $2,317, below its opening price after hitting an intraday high of $2,368.

The US economy continued to give mixed signals about its robustness. S&P Global released its June Purchasing Managers Index (PMI) reading, which beat estimates and outperformed May numbers. However, the U.S. housing sector continued to deteriorate after existing home sales for May missed target and fell compared to April data.

After the PMI release, investors abandoned gold and bought the dollar, which according to the US dollar index (DXY) increased by 0.14% at 105.80.

US data released this week highlights uncertainty as some economic indicators confirm the economy remains solid. On the positive side, industrial production, flash S&P PMIs and retail sales increased, although the latter were lower than in the previous month.

On the other hand, the housing situation continued to deteriorate and the labor market, as measured by the number of Americans filing unemployment claims, was worse than expected. The data maintained investors’ chances for a September Fed rate cut.

Against this backdrop, gold prices continued to decline, as did technical indicators, pointing to a correction following a three-month rally that began in March and took XAU/USD to an all-time high of $2,450.

The CME FedWatch Tool shows the odds of a 25-basis-point Fed rate cut in September to 59.5%, down from 57.5% on Thursday. Meanwhile, the December 2024 federal funds rate futures contract means the Fed will cut interest rates by 36 basis points at the end of the year.

Daily market movement summary: Gold price falls due to sturdy US dollar

U.S. Treasury yields are flat, with the 10-year Treasury yield holding steady at 4.261%.
S&P Global Manufacturing and Services’ preliminary PMIs exceeded estimates in June. The Manufacturing PMI rose to 51.7, from 51.3, beating the estimate of 51. The Services PMI rose from 54.8 to 55.1, beating the forecast of 53.7.
U.S. existing home sales in May were lower than expected, falling to 4.11 million from 4.14 million in April, a decline of -0.7%.
Fed representatives recommended patience regarding interest rate cuts, emphasizing that their decisions will remain data-driven. Despite last week’s positive CPI report, policymakers reiterated the need to see more data similar to May’s before considering any changes.
Even though the US CPI report shows that the disinflation process is ongoing, Fed Chair Jerome Powell commented that the Fed remains “less confident” about progress in inflation.

Technical Analysis: Gold price drops below head-and-shoulders-eyes by $2,300

Gold’s downtrend resumed on Friday after buyers tested the head and shoulders pattern by dragging the XAU/USD price above the neck line of the pattern. Despite achieving a daily close above the latter, sellers defended the neckline and pushed the spot price to a modern three-day low of $2,316.

That said, the path of least resistance is downhill. The next support will be $2,300. After clearing, XAU/USD will fall to $2,277, the May 3 low, and then the March 21 high of $2,222. Further losses lurk underneath, with sellers staring at a target head and shoulders chart pattern of $2,170 to $2,160.

Conversely, if gold reclaims $2,350, it will expose additional key resistance levels, such as the June 7 cycle high of $2,387, ahead of the $2,400 challenge.