Gold Market Stuck in Neutral as U.S. Economic Data Supports Fed's Monetary Policy

- The gold market is stuck in neutral and could remain there through the rest of the summer as U.S. economic data continues to support the Federal Reserve's monetary policy tightening bias; however, analysts say that near-term weakness could be seen as a buying opportunity as the market waits for a new spark to trigger a broader rally.

"Gold has a lot of competition as a safe-haven asset as the idea of a soft landing in the U.S. economy grows as consensus," said Edward Moya, senior market analyst at OANDA."The long-term interest in gold is there, but this is going to be a tough environment. Gold will struggle until we see a market risk event."

Analysts note that markets remain laser-focused on economic data as the Federal Reserve keeps its options open and remains data-dependent. The problem for traders and investors is that the data is still not providing any clear guidance. Analysts have said that U.S. economic data has to turn decisively negative before interest rate expectations start to shift.

Aside from the economic data, the bond market is something that analysts are keeping an eye on, as higher volatility could be the spark that ignites a broader rally. While the U.S. bond market is not expected to see an immediate collapse, analysts said they are looking for cracks. Concerns over U.S. debt levels started to grow after Fitch Ratings downgraded U.S. long-term debt. Those fears were sharpened this past week following a disappointing 30-year bond auction.

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