Gold Prices Forecast: Steady but Vulnerable Ahead of Key US Economic Data

LONDON (June 3) Gold prices traded flat on Monday as investors braced for a series of critical U.S. economic reports that could provide insights into the health of the economy. This comes on the heels of recent inflation data suggesting that the Federal Reserve may have room for rate cuts later in 2024.

At 10:40 GMT, XAU/USD is trading $2328.61, up $1.41 or +0.06%. This is up from an intraday low of $2314.795.

Spot Gold Unchanged

The price action is somewhat subdued, despite hitting its lowest level since May 9 earlier in the session. The precious metal posted a 2% gain in May and is up about 13% year-to-date. The market is closely monitoring upcoming U.S. economic data to assess whether the economy is heading for a soft landing.

Key Economic Reports Awaited

Several important reports are set to be released this week, including the Institute of Supply Management’s (ISM) nationwide PMI reading, the ADP employment report, and the non-farm payrolls data. These reports will provide vital clues about the state of the economy and the future path of monetary policy.

U.S. Treasury Yields and Economic Data

U.S. Treasury yields fell on Monday as investors awaited fresh economic data, including JOLTs job openings for April and the May jobs report. The ISM’s purchasing managers’ index reports for both the services and manufacturing sectors are also due, with the latter being released on Monday.

Impact of Inflation Data on Rate Cut Expectations

Investors are still digesting Friday’s release of the personal consumption expenditures (PCE) price index for April. The core PCE, which excludes food and energy costs, rose 0.2% on a monthly basis and 2.8% year-over-year. The data has stabilized U.S. inflation expectations and increased bets for a rate cut in September. Traders are now pricing in about a 54% chance of a cut in September, up from 49% before the report.

Market Forecast: Cautiously Bullish But Vulnerable

In the short term, gold prices are likely to remain sensitive to the upcoming economic data releases. While there is potential for a bullish trend if the data supports a dovish stance from the Federal Reserve, the uncertainty surrounding this week’s jobs report could lead to volatility. Traders should stay vigilant, as the market’s direction will hinge on the strength of the economic indicators and any signals from the Fed regarding future monetary policy adjustments.

FXEmpire