Gold Faces Reversal Amid Rebound as ISM PMI Fuels Dollar Strength

The U.S. ISM Manufacturing PMI for June came in at 49.0%, exceeding both prior readings and market expectations, signaling a mild recovery in the manufacturing sector.

Following the release, the U.S. Dollar Index stabilized from recent declines, bottoming out at 95.97 before rebounding, which temporarily capped golds upward momentum. Gold extended its two-day rebound, reaching an intraday high of $3357.73/oz, but entered a consolidation phase below $3340 during the Asian session.

While gold remains within a short-term rebound structure from a technical standpoint, the upcoming release of major macroeconomic data this week could limit further upside, pushing the market toward a directional decision.

Key Components of June ISM Manufacturing PMI Report:

The report highlighted persistent weakness in new orders, primarily due to policy uncertainty surrounding tariffs, which delayed procurement plans and decision-making. However, the production index notably rebounded above the 50-mark, indicating signs of recovery in manufacturing activity. Additionally, the decline in supplier delivery times and inventory restocking suggest ongoing relief in supply chain bottlenecks, improving overall manufacturing efficiency.

Overall, the report points to a modest recovery. While the headline figure remains below the expansion threshold of 50, the data suggests that the U.S. manufacturing sector is in gradual repair. This has offered near-term support for the dollar while weighing slightly on gold.

(Figure 1: U.S. June ISM Manufacturing PMI – Source: ISM Report)

Further analysis of inventory dynamics reveals that the gap between Inventories and Customers‘ Inventories stands at +2.5%, indicating that manufacturers are cautiously restocking rather than entering a full destocking cycle. This suggests that although end-user demand has not surged, it remains resilient. In an environment where the economy hasn't fully recovered and companies remain cautious with restocking, the current inventory structure helps mitigate inflationary pressures and indirectly supports the Fed’s dovish outlook.

Backlog Orders fell by 2.8%, but the Production index's climb into expansion territory shows that manufacturers are successfully converting work-in-progress into deliverable inventory, pointing to stronger output momentum. Given that new orders have not yet picked up, inventory build-up risks remain low, and firms continue to adopt a conservative restocking approach, with no signs of systemic inventory stress.

Looking deeper, while this environment doesn't indicate the start of a strong restocking cycle, it also doesn't suggest a sharp reversal. With inflation on a slow descent and policy expectations shifting dovishly, the setup does not currently support a major downturn in risk assets. Instead, markets are likely to remain rangebound with a bullish tilt.

A forward-looking gauge, the Imports index, rebounded from 39.9% in the previous month to 47.4%, returning to a three-month average range. This suggests that last months sharp drop may have been a temporary anomaly. The rebound aligns with the view that restocking momentum in the manufacturing sector remains intact, reinforcing the broader narrative of resilient procurement activity.

Meanwhile, the Atlanta Feds GDPNow model revised its Q2 GDP forecast on July 1, lowering it from 2.9% to 2.5%, citing cooling consumer spending (-0.16) and fixed investment (-0.17). This confirms a structural slowdown in domestic demand.

Private inventories and net exports made a marginal positive contribution, but the overall economic trend remains modest. Risk asset structures remain intact, and without excess inventory or a shift in policy stance, markets are unlikely to experience a sharp reversal.

(Figure 2: Atlanta Fed GDPNow Forecast – Source: Atlanta Fed)

Risk appetite, driven by FOMO sentiment, continues to limit golds upside potential.

Technical Analysis: Gold

Examining gold's hourly chart reveals that the recent rebound from previous lows has reached the 50% Fibonacci retracement level (~$3349), a neutral resistance zone. The failure to break through the 61.8% key resistance has led to a high-level consolidation followed by a downward reversal, signaling weakening bullish momentum.

Furthermore, using Fibonacci Extension (FE) analysis based on the downward trend, the rebound precisely touched the FE 1.618 extension level ($3349), forming a bearish reversal signal from a technical standpoint.

• Short-term Bias: Bearish – Gold has completed its rebound correction and entered a downtrend. The $3349 level remains a key resistance; failure to reclaim this level keeps the bearish structure intact.

• Stop-Loss Recommendation: $20

• Support: $3325

• Resistance: $3349

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