• Gold rose above $2,330 as investors bet on Fed rate cuts later this year.
• Risk aversion resulting from political turmoil in Europe is increasing demand for safe and sound assets such as gold.
• US consumer sentiment declined in June, with inflation expectations remaining above the Fed’s 2% target.
• XAU/USD is supported by a decline in 10-year US Treasury yields.

The price of gold rose sharply during the North American session on Friday after inflation data in the United States (US) boosted investor hopes that the Federal Reserve (Fed) will cut interest rates later this year. Additionally, risk aversion caused by political uncertainty in Europe caused a flight to safety, strengthening the gold metal.

XAU/USD is trading at $2,333, gaining over 1.30% after rebounding from intraday lows of $2,301. While sentiment remains uncertain, U.S. stocks pared losses in the last hour of trading, with the Nasdaq rising 0.28% while the S&P 500 pared its earlier losses, refraining from holding its intraday low of -0.10%.

On the data side, U.S. consumer sentiment deteriorated in June while inflation expectations for one and five years remained above the Fed’s 2% target. Meanwhile, U.S. inflation data released this week was met with enthusiasm by investors who continue to bet that the U.S. central bank will cut interest rates twice, not just once, as policymakers predicted.

Chicago Board of Trade (CBOT) data shows investors expect 39 basis points (bps) of easing over the course of the year from the December 2024 federal funds rate contract.

The 10-year U.S. Treasury yield fell three basis points to 4.211%, providing a positive tailwind for the underperforming metal and overcoming a pause in bullion purchases in China.

The news that the People’s Bank of China has suspended its 18-month-long bullion buying frenzy has had a negative impact on the precious metal. PBOC resources in May remained stable at 72.80 million troy ounces of gold.

Daily Market Change Summary: Gold price strengthens amid robust US dollar

• The US Dollar Index (DXY) rose 0.28% to 105.53, limiting gold prices.
• The University of Michigan Consumer Sentiment Index fell to 65.6 from 69.1 in June, missing the consensus mark of 72, marking the lowest sentiment level in seven months.
• Inflation expectations for the next twelve months are expected to remain unchanged at 3.3%; while over the five-year period, inflation expectations are expected to decline to 3.1%, down from the previous 3.3%.
• On Wednesday, Fed Chairman Jerome Powell said the Fed was less confident about inflation than previously “for cuts.” He added: “If employment were to weaken unexpectedly, the Fed stands ready to respond.” Asked about the US CPI report, Powell noted that it was just one report and emphasized the need to monitor the evolution of the deflation process towards the Fed’s target.
• Even though the US CPI report shows that the disinflation process is ongoing, Fed Chairman Jerome Powell commented that the Fed remains “less confident” about progress on inflation.
• Although the latest CPI and PPI reports in the US were weaker than expected, the latest NFIB Small Business Optimism Index survey for May showed that companies are struggling with higher prices and access to inexpensive financing.

Technical Analysis: Gold Price Sellers Regain Control as Prices Head towards $2,300

The gold price is neutral or on a downward trend as the head and shoulders pattern remains unchanged, suggesting further decline is ahead. While momentum shows a recovery among buyers, the Relative Strength Index (RSI) remains bearish, suggesting the uptrend may be short-lived and open the door to further losses.

If gold extends its gains above the June 7 cycle high of $2,387, it will be poised to test the $2,400 mark. Conversely, if XAU/USD falls below $2,300, the first support will be the May 3 low of $2,277, followed by the March 21 high of $2,222. Further losses lie below as sellers would expect a target head and shoulders pattern around $2,170-$2,160.