Morning Note: Gold Dips; S&P 500 Records; BoJ Cautious

Gold Slips as Geopolitical Risks Ease

Gold slipped to around $3,246 per ounce during Monday’s Asian trading session, hovering near its lowest level in a month, before rebounding to the $3,270 level at the time of writing. The decline was primarily driven by easing geopolitical risks in the Middle East and progress in global trade negotiations, which reduced demand for the metal as a perceived safe-haven asset. A tentative ceasefire between Israel and Iran has so far held, calming fears of a broader regional conflict.

Adding to the risk-on sentiment, U.S. President Donald Trump recently announced the signing of a trade agreement with China and teased a potential “very big” deal with India. Reports also indicated that the U.S. is close to finalising agreements with Mexico and Vietnam, while negotiations with Japan and other nations continue. Meanwhile, investors are closely watching key U.S. labour market data this week, including job openings, the ADP employment report, and the non-farm payrolls, which may offer fresh clues on the Federal Reserve’s interest rate outlook.

(Gold Daily Price Chart, Source: Trading View)

From a technical analysis perspective, gold has recently been rejected from the resistance zone of 3,425 – 3,445, driving the price lower and forming a series of lower highs and lower lows. It even broke below the order block at 3,310 – 3,330, retested the support zone of 3,228 – 3,253, and rebounded from that area at the time of writing. If the price manages to surge back above the order block, it may signal a potential shift in momentum, with bullish pressure possibly regaining control and pushing the price higher to retest the resistance zone

S&P 500 Hits New Highs on Trade Optimism

Wall Street extended its rally last Friday, with the S&P 500 and Nasdaq closing at record highs as optimism over trade deals boosted investor risk appetite. Economic data also strengthened expectations for interest rate cuts by the Federal Reserve. The Personal Consumption Expenditures (PCE) report revealed an unexpected decline in both consumer income and spending for May. Although tariffs have not yet translated into price growth, inflation remains above the Fed's 2% annual target. Based on CME’s FedWatch tool, markets have priced in a 76% chance of a rate cut in September, and a 19% probability of an earlier cut in July.

However, gains were tempered after President Donald Trump abruptly ended trade talks with Canada in response to its digital tax targeting tech companies. Meanwhile, positive trade developments emerged elsewhere, Washington and Beijing reached a deal to fast-track rare-earth shipments from China to the U.S., ahead of the July 9 expiry of a 90-day tariff reprieve. Additionally, the U.S. Treasury Secretary stated that trade deals with 18 key partners could be finalised by the September 1 Labour Day deadline.

(S&P 500 Index Daily Chart, Source: Trading View)

From a technical analysis perspective, the S&P 500 index has rebounded from the support zone of 4,900 – 4,960 since the beginning of April 2025, as reflected by the formation of higher highs and higher lows. Recently, it broke above the resistance zone of 6,100 – 6,140, forming a new higher high and is currently trading at an all-time high. With such a strong breakout and sustained bullish momentum, the index may continue to rise unless a significant bearish reversal pattern or confluence signals a potential pullback.

BoJ Signals Patience Despite High Headline Inflation

The Bank of Japan’s cautious approach to further interest rate hikes hinges on a lesser-known inflation gauge, which emphasises domestic demand and wage trends over volatile food and energy prices. While this underlying inflation measure remains below the central bank’s 2% target, headline inflation continues to exceed the target at multi-year highs, stirring public frustration and previously supporting arguments for more aggressive tightening.

Recent concerns about domestic consumption and global economic uncertainty have further clouded the Bank’s effort to anchor inflation expectations. Governor Kazuo Ueda has acknowledged the delicate task of shifting expectations after years of deflation, noting that while the BoJ has managed to “de-anchor expectations from zero,” they have yet to firmly “re-anchor them at 2%.” As a result, the Bank is maintaining its accommodative stance, balancing inflation management with the risk of undermining fragile consumer sentiment.

(USD/JPY Daily Chart, Source: Trading View)

From a technical analysis perspective, the USD/JPY currency pair was recently rejected from the resistance zone of 147.70 – 148.20, pushing the pair lower and even breaking below the order block at 144.70 – 145.20. It then rebounded slightly to retest the order block but was rejected by bearish pressure, driving the pair lower at the time of writing. This valid bearish structure may potentially lead the pair to retest the support zone of 142.10 – 142.70.

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Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.