Gold prices have not yet been able to overcome the initial resistance zone around 4,200 USD/ounce, while investors continue to assess US interest rate outlook in the last months of the year.
The recovery of the USD after a previous period of weakness also put more pressure on gold. The USD Index fluctuates around the 101 point mark. Usually, a stronger greenback makes gold more expensive for buyers using other currencies.
Meanwhile, the latest data from the US Institute for Supply Management shows that the service sector continues to grow. The US Purchasing Managers' Index in the service sector reached 54 points in June, slightly down from 54.5 points last month but still maintained above the 50 point threshold, showing that economic activity continues to expand.
Some components of the report show that the economic picture is not completely consistent. The business activity index decreased from 57.7 to 55.4 points, while the employment index increased sharply from 47.9 to 51.2 points.
Price pressure shows signs of cooling down but remains high. The input price index decreased from 71.3 to 67.7 points. This shows that inflation is gradually decreasing but not enough to eliminate concerns about price pressure in the US economy.
Businesses participating in the survey continue to mention the impact of tariffs on costs. Meanwhile, fluctuations in oil prices and costs of energy-related products are forecast to continue to affect the supply chain in the near future.
The US economy only created 57,000 jobs in June, lower than market expectations. The unemployment rate fell to 4.2%, but the labor force also decreased by about 720,000 people.
It can be seen that the US labor market is sending mixed signals. Slower job growth may make the Fed more cautious in continuing to tighten monetary policy. However, the decrease in unemployment and still high inflationary pressure make interest rate prospects more unpredictable.
After the jobs report, expectations of the Fed raising interest rates in the short term fell. The probability of the market betting on an interest rate hike at the July meeting fell to about 22%, from over 31% before the jobs report was released.
However, investors have not yet completely eliminated the possibility that the Fed will continue to tighten monetary policy before the end of 2026. This is one of the factors that makes it difficult for gold prices to create strong upward momentum, despite supporting factors such as safe-haven demand and the weakening of some economic data.
At the most recent meeting, the Fed kept the target interest rate in the range of 3.5-3.75%. The agency still prioritizes inflation control, in the context that prices continue to be higher than the target of 2% and energy supply shocks potentially put more pressure on inflation.
Therefore, the Fed meeting minutes expected to be released on July 8 are becoming the focus of the market. Investors will look for more signals about the level of division between policymakers and the necessary conditions for the Fed to change its interest rate orientation.
Besides monetary policy, developments in the Middle East continue to be a variable for the gold market. Risks related to transportation through the Strait of Hormuz have cooled down compared to the most tense period, but the situation has not completely returned to normal.
Transportation through this strategic strait is gradually recovering, while information about oil production increase plans by some OPEC+ members contributes to pushing oil prices down.
Brent oil prices traded around 71.72 USD/barrel, while WTI oil fluctuated near 68.40 USD/barrel. This price is significantly lower than the period when the market reacted strongly to the risk of supply disruption due to conflict.
However, warnings about maritime safety, mine-related risks and incidents for some transport ships still make the geopolitical risk compensation not completely disappear.
For gold, the Middle East factor currently creates a safe-haven demand, but not strong enough to become a driving force dominating the market. In the short term, the outlook for the precious metal is likely to continue to depend mainly on fluctuations in the USD, US bond yields and the latest signals from the Fed.
