In early Asian trading on Tuesday, spot gold fluctuated narrowly and is currently trading near $2319.85/oz. On Monday, gold fell by 0.6% to close at $2318.82/oz, as Federal Reserve officials continued to give hawkish speeches, helping to boost U.S. Treasury yields. Investors are waiting for more U.S. data and speeches from Fed officials this week for more clues on monetary policy prospects.

Kitco Metals senior market analyst Jim Wyckoff said, "At present, there is indeed a lack of new major fundamental news, so the gold market is looking for direction from external markets. Gold prices may hover in a range of $2300 to $2400 until the next major fundamental catalyst arises, which may not occur until sometime in July."

After a sharp drop last week, the attractiveness of non-yielding gold to investors diminished as the yield on U.S. 10-year Treasury notes rebounded.

Philadelphia Fed President Harker said on Monday (June 17) that if his economic forecast comes true, the Fed will cut rates once this year.

Minneapolis Fed President Kashkari said on Sunday (June 16) that it was a "reasonable bet" that the Fed would cut rates once this year, but not until December.

Traders are now closely watching speeches by New York Fed President Williams and Fed Governor Quarles later.

Thursday's weekly jobless claims and Friday's preliminary Purchasing Managers' Index (PMI) could provide more information on consumption and economic strength.

(Spot gold daily chart, source: E-Huitong)

Harker: My base-case scenario is one rate cut this year

Philadelphia Fed President Harker said on Monday that if his economic forecast comes true, the Fed will be able to cut interest rates once this year.

"If everything goes as expected, I think one rate cut by the end of the year is appropriate," Harker said in a prepared speech at an event hosted by the Philadelphia Fed. He outlined his views, which are that the base-case scenario is for economic growth to slow but remain above trend, unemployment to tick up slightly, and inflation to "eventually" return to target.

Harker said that while last week's consumer price index reading was "impressive," progress on inflation so far this year has been modest and, given overall uncertainty, he needs to analyze more data over the next few months before making a decision.

Harker added that the Fed's policy rate currently needs to be kept on hold to balance upside risks such as persistent housing inflation and "continually high inflation rates in the services sector, particularly autos, insurance, and repairs."

However, Harker did not rule out the possibility of changing his view on rates with more economic data being parsed. "If the data changes this way or that way... we will continue to rely on data, and I think two rate cuts this year or no rate cuts this year are both very possible," he said.

At the last policy meeting, the median forecast of the 19 Fed officials was for one rate cut this year, while financial markets were currently expecting two rate cuts by the end of the year.

Hawkish speeches by Fed officials once again dampened expectations of a rate cut in September and put pressure on gold prices. According to CME Fed Watch, the probability of a rate cut in September fell to 61.5% from 68.5% the day before.

U.S. bond yields rose.

Hawkish speeches by Fed officials also provided upward momentum for U.S. bond yields, which rose on Monday after a sharp drop last week. U.S. 2- to 30-year Treasury yields rose after four consecutive days of decline.

Analysts said U.S. bond yields were ready to rebound after last week's fall.

The yield on 10-year Treasury notes rose by 6.2 basis points to 4.275% on Monday, the largest daily drop this year was seen on last Friday because economic data was weaker than expected.

The yield on 30-year Treasury bonds in the United States rose 5.3 basis points to 4.403% on Monday.

On Monday, the two-year national bond yield rose by 8.3 basis points to 4.767%.

"Even if the US yield rises, overall, the rise will be limited, and data on the housing market, retail sales, and unemployment claims will be released this week," said Stan Shipley, Managing Director and Fixed Income Strategist at Evercore ISI. "Overall, I think retail sales and housing data will be better than expected, rebounding from March and April data. The market will also closely monitor the number of unemployment claims as data spiked last week. So the question is: Is the labor market really slowing down?"

In addition, the degree of the US Treasury yield curve inversion deepened on Monday. The yield difference between the two-year and 10-year Treasury yields, widely regarded as a precursor to economic recession, was negative 49.5 basis points, the deepest invert since mid-March.

Currently, the yield curve is actually in a "teddy bear flat" state, where short-term yields are rising faster than long-term yields. This may indicate a delay in interest rate cuts, as the US economy has been strong, analysts said.

Analysts also said that bond supply may be a factor in the drop in prices and the rise in yields. The Treasury Department will auction $13 billion of 20-year bonds and $21 billion of five-year inflation-protected bonds (TIPs) on Tuesday and Thursday this week, respectively.

"Before the auction, market participants usually sell bonds to push up their yields, and then buy back at a lower price."

"After experiencing the largest and most aggressive rate hike cycle in the world, the market seems to lean toward interest rate cuts," wrote Gregory Faranello, Head of US Rates at AmeriVet Securities, in a research report. "This won't be a straight line, but we've already done some incredible work at higher rate levels."

Fxempire's independent trader and analyst Vladimir Zernov predicted that gold faces pressure as traders focus on rising US Treasury yields. From a macro perspective, gold needs additional positive catalysts to sustain its upward momentum. Note that gold prices are strongly supported in the range of $2295-$2305 per ounce, so significant catalysts are needed to break below $2295 per ounce.

Federal Reserve Chairman Powell will testify before the Senate Banking Committee on July 9.

The office of Sherrod Brown, Chairman of the US Senate Banking Committee, said on Monday that Federal Reserve Chairman Powell will testify before the committee on monetary policy on July 9.

If the customary arrangement is followed, Powell will give the same testimony to the House Financial Services Committee the following day. A committee spokesman did not immediately respond to requests for comment.

These two hearings usually last for several hours, and lawmakers from both parties will question Powell on a range of issues, from interest rate policy to the status of the banking system.

The Federal Reserve held its policy rate target range unchanged at 5.25% - 5.5% last week and hinted that it may only cut rates once this year.

If this forecast comes true, the Federal Reserve may not take action before the November presidential election, assuming that inflation is slowing down and that there are no major cracks in the labor market.

Brown and other Democrats called on the Federal Reserve to cut interest rates to make housing more affordable. Republican presidential candidate Trump had previously said that a rate cut before the election would benefit Democrat Biden and said he believed the Federal Reserve might cut rates to influence the election.

At 07:51 Beijing time, spot gold was reported at $2320.17 per ounce.