Gold Price Fundamentally Analysis

Gold prices are struggling to gain any significant traction on the first day of a new week, and they seesaw between tepid gains and minor losses throughout the early European session. A combination of divergent forces is currently affecting XAU/USD, which is currently trading around $1,924-$1,925.

There is a general weakening tone in the equity markets that supports safe-haven assets, including Gold. Over the past week or so, China has released a slew of weak economic data, including softer inflation figures on Monday, further highlighting the issue of slowing growth. Despite a decline in consumer inflation, China's Producer Price Index (PPI) declined in June at the fastest rate in seven-and-a-half years. Besides this, investors' sentiment continues to be weighed down by the threat of an escalation in trade conflicts between the US and China - the world's two largest economies.

Gold prices are expected to be weighed down by a goodish pickup in US Dollar (USD) demand. However, the unexpected drop in the unemployment rate and continued strong wage growth highlighted still tight labor market conditions despite a slight miss in the headline US Nonfarm Payrolls (NFP). The Fed (Fed) is expected to raise interest rates by 25 basis points at its July 25-26 policy meeting, so the rate-sensitive two-year US government bond is just below its highest level since June 2007. Moreover, the benchmark 10-year US Treasury yield remains around 4.0% and revives USD demand, capping gains for US Dollar commodities.

On Monday, without any relevant market-moving US economic releases, caution should be exercised before placing aggressive directional bets around the Gold price. Traders may also find it helpful to wait for Wednesday's latest consumer inflation figures. Furthermore, the Fed may alter its policy outlook in the near-term based on this data, which in turn could have a meaningful impact on USD demand and provide some meaningful momentum to XAU/USD.