Gold prices opened the first trading session of the week almost without much fluctuation after a strong sell-off last weekend, when investors temporarily stalled to assess the impact of the US jobs report exceeding expectations and waited for a series of important economic events to come.
Gold futures contracts opened at 4354 USD/ounce and at one point fell to a two-month low before closing almost sideways. The absence of a clear trend is also considered a noteworthy sign: after a 148 USD plunge in just one session - the sharpest drop in gold since March, the market has not yet seen strong enough buying to bottom out, but there is also no further selling pressure to pull prices deeper.
This cautious sentiment partly comes from the dense schedule of economic data releases during the week. The US Consumer Price Index (CPI) report for May will be released on Wednesday, followed by the producer price index (PPI) on Thursday. These are considered the last important inflation data before the policy meeting on June 16-17 of the US Federal Reserve (Fed).
Fed officials have now entered a "silent" phase before the meeting, making inflation data the main basis for the market to adjust interest rate expectations. If the CPI is higher than forecast, expectations that the Fed maintains a tough stance may continue to increase and put pressure on the next support zone of gold. Conversely, if inflation cools down, interest rate cut expectations may be revived, helping gold prices find a foothold.
The outlook for monetary policy continues to be the biggest factor putting pressure on the precious metal. According to CME's FedWatch tool, the probability of the Fed keeping interest rates unchanged in the upcoming meeting is at around 96%, almost completely eliminating the short-term policy easing expectation that the gold market had previously reflected.
Notably, the possibility of the Fed raising interest rates again at the end of the year is also increasing rapidly. Some analysts have even begun to put forward scenarios for the Fed to raise interest rates in Q4/2026 – a factor that could prolong pressure on gold, which is an asset that does not yield yields.
In the opposite direction, geopolitical factors still provide some support for gold. Diplomatic efforts to end the conflict in the Middle East continue to be hampered after Hezbollah rejected the ceasefire agreement between Israel and Lebanon, causing safe-haven demand to remain present in the market.
The need to defend against geopolitical risks is considered one of the important drivers promoting the long-term upward cycle of gold prices in recent times. Any escalating developments that risk disrupting energy supply routes or expanding regional conflicts can quickly re-ignite shelter buying power.
Technically, the short-term outlook for gold is still facing many challenges after the official price broke through the 200-day moving average (MA200) in the last session last week – for the first time since November 2023.
The sideways trading session at the beginning of the week is not enough to improve this technical signal. Analysts believe that MA200 is currently likely to shift from the support zone to the resistance zone in the upcoming recovery phases.
The market will specifically monitor whether gold can regain this technical milestone before the Fed meeting or not. If it fails, in the context that the Fed continues to send tough signals, the current correction may be prolonged.
This week is therefore seen as a "countdown" period to the US CPI report, as gold prices are stuck between long-term supporting factors such as inflation, central bank gold buying demand and geopolitical risks with the short-term reality that the Fed does not have much room to reverse policy.
