Gold Suffers Weekly Slump
Gold experienced its worst weekly decline of the year in the week ending May 24. This decline was driven by the release of hawkish FOMC minutes and strong US PMI data, causing traders to adjust their rate expectations and leading to a significant drop in the price of gold. Despite closing the week with a 0.24% gain at $2334 on Friday, gold had fallen nearly 3.30% from its record high of $2450 on May 20. The ten-year US yields rose around 1% for the week, boosting the US Dollar Index, which saw a weekly gain of 0.30% to 104.75.
US Data Insights
Key US economic data released last week included durable goods orders and University of Michigan sentiment figures. Durable goods orders exceeded expectations, while sentiment was revised higher. The release of the FOMC minutes from the May meeting revealed a hawkish stance among some committee members, leading to increased uncertainty over future rate cuts. S&P Global’s PMI data for the US showed a strong performance in both manufacturing and services sectors, reducing the likelihood of multiple rate cuts this year.
Mixed Data from UK and Euro-zone
Data from the UK and Euro-zone presented a mixed picture, with hotter-than-expected April inflation in the UK potentially impacting future rate cuts. This uncertainty in the macroeconomic environment did not support gold prices.
Upcoming Data and Geopolitical Developments
Looking ahead, upcoming US data includes home sales, GDP figures, and inflation data. In addition, China’s PMIs will be released at the end of the week. Geopolitically, tensions between Israel and South Africa, as well as China’s actions towards Taiwan, could impact market sentiment.
Insight from World Gold Council
The World Gold Council highlighted the expected demand for gold in India during the upcoming festive period, noting that high prices may lead to subdued jewelry demand.
Weekly Outlook and Investment Opportunities
Despite the recent sell-off in gold, there may be opportunities to build medium to long-term positions, especially given disappointing US economic data post-FOMC meetings and the Fed’s reluctance to raise rates further. Resistance levels for gold are at $2350, $2380, and $2400, while support is seen around $2300-$2310.
It is important for investors to consider the broader economic and geopolitical factors when making decisions about gold investments.
