Gold sells off as US Dollar bounces, falling in line with bearish technicals

NEW YORK (June 4) Gold (XAU/USD) trades over three quarters of a percent lower in the $2,330s on Tuesday. A slight bounce from the US Dollar (USD), which is negatively correlated to Gold, could be partly responsible as could asset rotation into bonds. Commodities in general are trading lower – and the move is in line with Gold technicals which are short-term bearish. 

Gold weakens as broader commodity markets sell-off

The lion’s share of commodities and most equity markets are selling off on Tuesday, which – apart from idiosyncratic reasons such as the OPEC+ decision and Indian elections – seems to be a result of generalized fears about global economic growth. This seems to be due to the poor US ISM Manufacturing PMI data released on Monday. Another reason could be asset rotation as increasing numbers of investors reallocate to bonds. 

There are growing signs inflation is falling globally, with Friday’s US core PCE data undershooting estimates and Swiss inflation similarly missing the mark on Tuesday, after coming out at 0.3% month-over-month in May when economists had estimated a 0.4% rise. 

The Swiss CPI data has sparked speculation the Swiss National Bank (SNB) could make another interest rate cut at its meeting in June. With the European central Bank (ECB) highly anticipated to cut interest rates on Thursday and increasing speculation the Bank of Canada (BoC) could also cut rates on Wednesday, global bond markets are rallying and could be draining investment from Gold. 

FXStreet