Gold Rises Slightly, Trades in Tight Range

gold analysis

Gold prices inched slightly higher on Monday despite market indecision. Investors were treading cautiously because of the mixed signals from the Federal Reserve on tightening of monetary policy. The bullion’s gains were capped by the stronger dollar, which rose 0.1% against a basket of rival currencies.

Spot gold is currently trading at $1,777.60 per ounce as of 0842 GMT.

IG Market analyst Kyle Rodda explained that the Fed is sending mixed signals because investors are already thinking about normalizing policy, while central bank officials repeatedly stated that higher inflation would be transitory. He argued that the Fed’s tapering timeline is currently a major influence on the gold market. But AirGuide corporate advisory director Michael predicted the prices would consolidate in the short term at $1,790 per ounce.

DailyFX strategist Margaret Yang said that moving average convergence/divergence trended lower that indicates a bearish momentum. She explained that gold prices formed a bearish pennant that suggests a downside potential if prices break trendline support. The current support level is at $1,750 per ounce.

Meanwhile, the Commerce Department reported that consumer spending was unchanged in May. And the personal consumption expenditures (PCE) price index increased by only 0.5%, which was below analysts’ forecasts. PCE is the preferred inflation measure for the Fed’s 2% inflation target.

Market participants will be monitoring the bipartisan negotiations on President Joe Biden’s infrastructure plan. Senate Republicans were optimistic about a $1.2 bipartisan bill. It came after Biden withdrew his veto threat if the measure does not come in tandem with other Democratic spending priorities.

In physical trading, gold prices in China rose despite subdued demand. Dealers offered a $5 per ounce discount last week but now charge premiums of $3-6 over benchmark spot prices.  In India, gold futures plunged to their lowest prices since April. Dealers offered as much as $12 per ounce discounts, the highest since September 2020. Gold premiums in Singapore were unchanged at $1.20 per ounce. In Japan, dealers charge a maximum premium of $0.50.

In a related development, the U.S. Commodity Futures Trading Commission reported that market speculators cut their bullish stance in gold contracts to 76,163 in the week that ended on June 22.