Gold prices edged lower after opening Monday’s trading session with gains, but encountered strong resistance at $4,200, having touched a two-week high of $4,202 per ounce.
The yellow metal is currently trading above the weekly pivot point at $4,104, and stabilizing above it is likely to lead to a resumption of the uptrend, targeting the next resistance levels at $4,266 and then $4,357.
If gold fails to maintain trading above the weekly pivot point at $4,104, it will retest the first support level at $4,013; a break below this level would be a negative signal that could pave the way for a decline toward the next support level near $3,851.
In terms of geopolitical tension, the U.S.-Iran dealmaking process remains fragile but continues for now, as the question of Strait of Hormuz tolls and administration remains contentious,” Citi analysts wrote.
“We expect the MoU (memorandum of understanding) to hold, not because trust has suddenly emerged, but because the incentives to break are poor for both sides,” Citi analysts said.
Some shipping has resumed through the Strait of Hormuz, as called for under the initial U.S.-Iranian deal, but uncertainty is high after the two countries exchanged strikes last weekend following an Iranian attack on a cargo ship. With the prospect of shipping more oil, Gulf producers are working to increase output.
From a fundamental perspective, A tracker of activity in the all-important U.S. services sector is set to be in focus on Monday.
The Institute for Supply Management’s non-manufacturing purchasing managers’ index for June is seen coming in at 54.2, down slightly from 54.5 in the prior month. A reading above 50 denotes expansion.
The services sector makes up more than two-thirds of all U.S. growth, making it a crucial engine of the world’s biggest economy.
Later in the week, investors will have the chance to parse through minutes from the Federal Reserve’s latest policy meeting.
June’s gathering — the first under new Chair Kevin Warsh — saw the central bank opt to leave interest rates on hold at 3.5% to 3.75%. But official projections suggested that several policymakers still anticipate that the Fed will lift borrowing costs this year, in a bid to corral energy-fueled inflationary pressures.
However, Warsh used his inaugural post-decision press conference to hint at plans to overhaul some of the Fed’s longstanding operations, including its approach to forward guidance on rates. He has since reiterated this desire not to provide any clues into the trajectory of rates.
What markets did latch on to was Warsh’s statement that, in his view, inflation risks had come down. This, combined with soft payrolls and manufacturing sector activity last week, dented expectations that the Fed would imminently hike borrowing costs.