Gold Falls as Investors Remain Cautious Ahead of Two Interest Rate Decisions
Gold (XAU) price fell slightly on Monday as investors refrained from big purchases ahead of the Federal Reserve (Fed) and the Bank of Japan (BOJ) interest rate decisions.
XAU/USD movements will likely remain capped as traders await further clues about the Fed monetary policy path before identifying the metal's direction in the near term. Consequently, the focus will be on the outcome of Wednesday's two-day Federal Open Market Committee (FOMC) meeting.
Additionally, important US macro data, including the Friday nonfarm payroll (NFP) report, will influence the USD price dynamics and XAU/USD in particular. Therefore, the market may wait for some follow-through buying before confirming that the recent XAU/USD pullback from the all-time high has concluded.
A weaker sentiment in the equity markets and geopolitical risks from conflicts in the Middle East are key factors supporting the safe-haven asset. Additionally, the increasing confidence that the Fed will begin its rate-cutting cycle in September keeps the US dollar (USD) bulls on the defensive, keeping the US Dollar Index (DXY) moving below the two-week high touched on Monday. This also benefits the non-yielding gold.
XAU/USD rose during the Asian and early European trading sessions. Today, traders should pay attention to a key US JOLTs Job Openings report at 2:00 p.m. UTC. The data will provide insights into the current state of the US labour market.
If the data exceed expectations, XAU/USD will likely drop, possibly below $2,370. A weaker-than-expected JOLTS numbers could drive XAU/USD higher towards $2,400.
"Spot gold may retest support at $2,372 per ounce, with a good chance of breaking below this level and falling towards $2,353," said Reuters analyst Wang Tao.
Euro Moves Sideways, Awaiting the German CPI Data
EUR/USD lost 0.31% on Monday and closed below the 1.08300 local support level. Meanwhile, the US Dollar Index (DXY) broke above the 104.500 resistance level and gained 0.23%.
Inflation readings in Germany and Spain and a range of earnings announcements complete the countdown to this week's central banks' rate policy meetings.
The German Consumer Price Index (CPI) will also be released soon and is expected to remain unchanged at 2.2% year-on-year, with the monthly figure forecasted to accelerate from 0.1% to 0.2%.
This week, investors will closely watch US jobs data for July and the Manufacturing Purchasing Managers' Index (PMI).
Following a relatively mild June US inflation report, market participants speculate that the Federal Reserve (Fed) may lay the groundwork for a rate reduction later this year at its two-day policy meeting scheduled for Wednesday.
"The FOMC is set to hold steady but is likely to revise its statement to hint that a cut at the following meeting in September has become more likely," wrote analysts at Goldman Sachs. "We now see the risks to the Fed path as tilted slightly to the downside of our baseline of quarterly rate cuts, though not quite as much as market pricing implies," they added.
On Tuesday, EUR/USD has been moving sideways in a range of 1.08150–1.08250, waiting for Gerrman and Eurozone GDP and German CPI reports.
The German CPI data will come out today at 12:00 p.m. UTC. A higher-than-expected reading should be bullish for the euro, while a lower-than-expected reading may put bearish pressure on the currency.
Australian Dollar Stabilises Ahead of Key Australian Inflation Data
The Australian dollar (AUD) moved within a tight 0.65300–0.65700 range on Monday but finished the day essentially unchanged.
After falling almost uninterrupted for the last weeks, AUD/USD has managed to find support in the 0.65300 area. The recent weakness of the Australian dollar was mostly due to a decline in commodity prices as concerns about China's economic health strengthened following a surprise reduction in interest rates by the People's Bank of China (PBoC).
Fundamentally, however, AUD/USD seems to be oversold as the divergence in monetary policy expectations between the Federal Reserve (Fed) and the Reserve Bank of Australia (RBA) continues to favor AUD.
The latest interest rate swap market data implies more than 100 basis points (bps) worth of rate cuts by the Fed and no reductions by the RBA by April 2025. On the contrary, there is a small chance that the Australian central bank may hike the base rate at the monetary policy on 6 August.
The big test for the Australian dollar will come on Wednesday when the Australian Bureau of Statistics releases its Consumer Price Index (CPI) report for Q2.
Both headline and core inflation are expected to rise by 1%, pushing the annual CPI towards 3.8% and keeping the annual core inflation at 4%. These figures may prompt the RBA to raise the rate, which should trigger a bullish impulse in AUD/USD.
AUD/USD was rising slightly during the Asian and early European trading sessions. Today, traders should focus on the US data: CB Consumer Confidence Index and JOLTS Job Opening reports at 2:00 p.m. UTC.
The data will likely add volatility to all USD pairs. Lower-than-expected figures will almost certainly weaken the US dollar, pulling AUD/USD higher—possibly above 0.65700.
Conversely, results exceeding the forecast may damage the developing bullish trend in AUD/USD. Still, 0.65150 is expected to remain a strong support in the short term.