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Gold Price Loses Ground Further, Buyers Look to US Inflation for Momentum

Gold price declined on Monday, trading at $2,218 per ounce at the spot market after going down by 0.6 percent in the intraday session. Futures gold followed a similar trajectory, losing 0.6 percent to trade at $2,334. Gold’s appeal as a safe haven asset has declined with the cooling of geopolitical tensions in the Middle East.

However, gold prices have received some propulsion in the aftermath of the European Parliamentary elections, which were underpinned by surprising results in France and Germany. Gold had a good run last week, as the EU jitters drove its price up by 1 percent.  However, the yellow metal is still down by 0.4 percent in June, and traders are looking to the US inflation trajectory for bullish positioning.

US Consumer Price Index (CPI) declined unexpectedly in May, strengthening perception of a first interest rate cut of the year in September. Also, gold price has gotten a reprieve from falling US treasury bond yields. As of this writing, returns on benchmark 10-year bonds stand at 4.28, a significant decline from the 4.70s territory it reached in late May.

In the interim, gold price will be under pressure from hawkish stance by the Fed. The latest of these was a comment by Minneapolis Fed President Neel Kashkari, who stated over the weekend that high interest rates could remain in place until December.

Technical analysis

The momentum on gold price favours the sellers, with the pivot likely to be at 2,326.52. If resistance persists at that mark, the first support will likely be at 2,319.79, and a break below that level will strengthen the downward action to move toward 2,313.54. On the other hand, a move above 2,331.50 will favour the buyers to take control, and they are likely to encounter resistance at 2,332.57. A break above that mark will invalidate the downside narrative, and could extend the upward momentum to test 2,336.74.