Gold prices fell by more than 1% on Monday, signaling a pause in the upward trend that had lasted for two consecutive sessions.
The yellow metal is currently trading near the weekly pivot point at $4500, breaking above it is likely to reinforce the uptrend, targeting weekly resistance levels at $4635 then $4729.
If gold fails to break above the weekly pivot point of $4500, it may test the first support level at $4406, a break below this level would be a negative signal that could open the door for prices to decline toward the second support level at $4271.
In terms of geopolitical escalation, much of the focus in markets will center on ongoing diplomatic efforts to wind down the more than three-month old war in Iran.
U.S. President Donald Trump has stressed that he believes Iran wants to reach an agreement, although key sticking points, particularly Tehran’s nuclear ambitions, continue to hover over negotiations. Trump is now reviewing a proposed memorandum of understanding which would reportedly extend an ongoing ceasefire, call for shipping to restart in the Strait of Hormuz, and offer a framework for discussing Iran’s nuclear program.
Iran’s chief negotiator flagged on Sunday that Tehran would not accept an agreement that does not secure its rights.
Both sides have continued to trade military strikes, denting hopes for an imminent deal that could ease worries over an energy-induced burst of inflationary pressure in countries around the world. The Brent crude contract, the oil benchmark, was last trading below peaks touched earlier in the conflict, but remains well above levels prior to the outbreak of the fighting in late February.
From a fundamental perspective, traders are keeping close tabs on U.S. economic indicators, which could offer some insight into whether warnings of soaring prices and slowing growth are justified.
This week, one of the key readings will come from the Labor Department’s monthly employment report. Economists expect that the U.S. economy added 95,000 jobs in May, compared to 115,000 in April. The unemployment rate is tipped to stand at 4.3%, equaling the prior month.
Separate metrics of job openings and labor turnover, private payrolls, and layoffs are also set to be unveiled this week.
Furthermore, on Monday, markets will have the opportunity to parse through a gauge of activity in the key U.S. manufacturing sector from the Institute for Supply Management.
The ISM manufacturing purchasing managers’ index is seen coming in at 53.3 in May, compared to 52.7 in the prior month. A level above 50 indicates expansion.
Economists also anticipate that a metric of prices paid by these business, which could shed some light on the state of inflation, will edge up to 85.3 from 84.6 in April.