• Gold is pulling back after last week’s steep sell-off. 
• Traders are keen to wait for US inflation data later this week to reassess fundamentals. 
• Gold is probably forming a consolidation or continuation pattern within a downtrend that is likely to go lower. 

Gold (XAU/USD) is trading in the $2,340s, making a modest pullback from oversold levels on Monday. Markets are quiet ahead of potentially market-moving US inflation data later in the week. Public holidays in the UK and the US further reduce volumes. 

Gold pulls back after steep sell-off

Gold price dropped from a peak of $2,450 to a low of $2,325 last week, on the back of changing expectations for the future path of US interest rates. 

Better-than-expected US economic data last week led to a revision of market expectations for when the US Federal Reserve (Fed) is foreseen lowering interest rates. Whilst last week interest-rate future’s markets gave a probability of 65% that the Fed will lower its fed funds rate by 0.25% at its September meeting, today they are only giving it odds of 49%, according to the CME Fedwatch tool. 

The maintenance of interest rates at high levels is negative for non-yielding Gold because it increases the opportunity cost of holding the precious metal