Gold Price Losses Momentum As China Stays Away from the Market

Summary:
• Gold price didn't leverage the dollar's weak standing on Monday as China's decision to pause buying for the second month in a row weighed in.

Gold price declined on Monday, as investors ignored the dollar’s weak fundamentals to take profit amid cooling geopolitical temperatures in the Middle East. Spot gold traded at $2,374 per ounce at the time of writing, having lost 0.7 percent of its value in the intraday session at the time of writing.  Gold futures was down by a similar margin, trading at $2,380 at the time of writing.

The US dollar‘s appeal has declined in recent days as US economic fundamentals point to rising prospects of interest cuts. The latest pressure came on Friday after the US unemployment rate rose in June to 4.1 percent, despite the NFP figures beating the forecast figure.  The resulting sentiment has driven down yields on US treasuries, bringing tailwinds to non-yielding gold. As of this writing, yields on benchmark 10-year US treasury bonds were at 4.281 percent.

Meanwhile, China paused gold purchases for the second month in a row in June, creating bearishness about the commodity’s demand-side. Furthermore, the geopolitical tension in the Middle East has eased in recent days as Hamas relaxed its demand that Israel vows to end the war first before the signing of a ceasefire deal. This is seen as a significant step forward in potentially bringing an end to the war.

Looking ahead, traders will turn their focus to Fed Chairman Jerome Powell’s congress testimony on Tuesday for hints on the potential rate cut timeline.

Technical analysis

Gold price pivots at 2,372, and a move above that mark will signal control by the buyers. The first resistance will likely come at 2,376, and a break above that mark will strengthen the upside to potentially take the price to 2,381. Conversely, a move below 2,372 will favour the sellers to take control, and the downside will likely find the first support at 2,368. If the sellers extend their control at that point, the first support will be broken, thereby invalidating the upside narrative. Furthermore, that could strengthen the sellers to push the price lower to test 2,365.