The price of gold fell by about 0.5% after jumping more than 1% on Friday. The drop in prices was due to partial profit-taking, as well as a correction of positions by investors ahead of the publication of US data and statements by Fed policymakers.
Meanwhile, the yield on 10-year U.S. Treasury bonds rose by 2.5 basis points to 4.238%, making bullion less attractive. Meanwhile, the US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) fell by 0.02% to 105.54.
Minneapolis Fed President Neel Kashkari said yesterday that it is "reasonable to expect" the Fed will cut interest rates once this year, in December. Last week, updated Fed forecasts showed that on average policymakers expect one Fed rate cut this year. A slew of Fed policymakers are due to speak this week. In addition, investors will focus on US data on retail sales and PMI indices, which may cause a reassessment of the prospects for monetary policy. According to the CME FedWatch Tool, markets see a 10.3% probability of a 25 basis point rate cut at the Fed meeting in July, a 65.9% probability of a rate cut in September, and a 79.7% probability of monetary policy easing in November. Lower rates make non-yielding bullion a more attractive investment choice.
"The gold remains supported by these persistent hopes that the Fed's policy pivot should eventually arrive. The French political turmoil has also added to the cacophony of risk-off triggers on the global stage," Han Tan, chief market analyst at Exinity Group, said.