- Gold is range-bound in a relatively quiet holiday trade on Monday.
- A break of Monday's lows could be the catalyst for a long squeeze and open prospects of a significant move to the downside.
- The Fed minutes and Nonfarm Payrolls are eyed as potential catalysts.
At $1,807.17, the gold price is slightly underwater in the midday North America session and holiday markets. Bond markets have been closed for the US Independence Day holiday but the greenback has seen two-way action which has both supported and sunk gold at the start of the week.
Despite being down on the day, the gold price remains above its lowest level scored since early February which was made on Friday amid a risk-off environment that had supported the greenback. The yellow metal was also pressured after India unexpectantly increased its import tax after a ballooning trade gap pushed the rupee to a record low. ''This could weaken demand just as outflows from gold-backed ETFs pick up,'' analysts at ANZ bank argued. ''Rising inflation has raised the likelihood that central banks will aggressively hike rates, dampening the appeal of the precious metal.''
Despite the yellow metal's safe-haven allure, gold is a non-interest-bearing asset class which is keeping a lid on advancements in gold at times of risk-off. ''Gold prices have disconnected altogether from market pricing for Fed hikes over the past month, and have instead grown their relationship with the USD, pointing to a smaller magnitude of idiosyncratic flows for the yellow metal,'' analysts at TD Securities have argued.
''Liquidity is being sapped from global markets, and gold flows have not been spared. After all, the massive amount of potentially complacent speculative length from proprietary traders in the yellow metal does not appear to be associated with a Fed narrative nor with a stagflationary view of the world, considering that this length was accumulated as early as 2020,'' the analysts explained, saying, ''in turn, while the bias remains to the downside in gold, participants will need a catalyst to shake out the complacent longs in precious metals.''
Meanwhile, the US dollar at the start of the week was weaker until the start of the New York session, bleeding out from the two-week high made on Friday. Reports that the White House will announce an easing of some Chinese tariffs later this week in an attempt to dampen elevated inflation helped inject some optimism back into markets on Monday.
Additionally, we had data on Friday that showed euro zone inflation was surging to another record. This has hardened the case for the European Central Bank to raise interest rates later this month for the first time in a decade. However, moderate action is expected in comparison to the Fed and the divergence between the two central banks could be perceived to be more favourable for the US dollar in the medium term.
For the week's calendar, Nonfarm Payrolls is expected to show that Employment likely continued to advance firmly in June but at a more moderate pace after three consecutive job gains of around 400k in March-May, analysts at TD Securities said.
Meanwhile, the minutes of the Federal Reserve's June meeting will also be eyed.
''Persistent high CPI inflation and nascent signs of de-anchoring inflation expectations forced the Fed to amp the pace of rate tightening. The meeting minutes are likely to offer further colour around the Fed's more hawkish reaction function,'' the analysts at TD Securities said.
Gold technical analysis
The yellow metal is trapped in a consolidation range, moving within a $10.29 range around Friday's highs. A break of today's lows could entice a long squeeze and potentially encourage more selling for a downside continuation below $1,785 for the sessions ahead:
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD climbs to fresh daily highs near 1.0750

EUR/USD has regained its traction and climbed to a daily high near 1.0750. Despite the upbeat ADP employment data, the downward revision to Unit Labor Costs for Q1 and the sharp drop seen in ISM Manufacturing PMI's Prices Paid Index weighed heavily on USD, boosting the pair.
GBP/USD rises to multi-week highs above 1.2500

GBP/USD has extended its daily rally and touched its highest level since mid-May above 1.2500. The US Dollar continues to weaken against its rivals as soft wage inflation data feed into expectations for a pause in Federal Reserve rate hikes at the upcoming policy meeting.
Gold climbs above $1,980 as US yields extend slide

Gold price climbed above $1,980 in the American session on Thursday. Following soft manufacturing and wage inflation data from the US, the benchmark 10-year US Treasury bond yield is down more than 1% on the day near 3.6%, fuelling XAU/USD's daily rally.
XRP unlocks tokens worth $500 million as SEC vs. Ripple verdict looms

Ripple, the cross-border payment remittance giant, has unlocked a total of 1 billion XRP tokens from escrow on Thursday. This unlock is a part of the scheduled monthly distribution strategy of the XRP token.
LCID sheds 13% with $3 billion share sale

Lucid Group (LCID), the maker of the Lucid Air luxury electric sedan, surprised shareholders late Wednesday when it announced that it would raise $3 billion in new common stock.