Gold, DAX Forecast: Two trades to watch

Gold Falls to a Two-Month Low as Rate Hike Bets Build  

Gold has extended losses on Monday, falling to its lowest level in two months as stronger-than-expected U.S. economic data and renewed tensions in the Middle East push Treasury yields and the U.S. dollar higher.

Friday's non-farm payroll report showed the U.S. economy added 172,000 jobs in May, marking a third consecutive month of solid job growth and reinforcing the view that the labour market remains resilient despite elevated interest rates.

The strength of the labour market gives the Federal Reserve greater scope to keep monetary policy restrictive as it continues to battle inflation. Following the NFP data, markets are now fully pricing in a 25-basis-point Fed rate hike before the end of the year.

At the same time, renewed hostilities in the Middle East have added to inflation concerns. Oil prices have risen sharply amid fears that the conflict could drag on, increasing the risk of supply disruptions and keeping energy prices elevated.

While gold is traditionally viewed as a hedge against inflation and geopolitical uncertainty, the metal is struggling to benefit from safe-haven demand. Instead, rising Treasury yields and a stronger U.S. dollar are proving the dominant drivers. Higher interest rates increase the opportunity cost of holding non-yielding assets such as gold, while a stronger dollar makes the precious metal more expensive for overseas buyers.

Attention now turns to this week's U.S. CPI and PPI reports. Any signs that inflation remains stubbornly high could reinforce expectations of tighter monetary policy and place further pressure on gold prices.

Gold forecast- technical analysis

Gold has broken below its symmetrical triangle pattern. The price broke out below the rising trend line support and the 200 SMA, falling to a low of 42.68, a level last seen on the 23rd of March. The breakout from the triangle pattern combined with the RSI below 50, keep sellers hopeful of further downside.

Support can be seen at 4,100, the 2026 low. Below here, attention will turn to the 4000 round number and 3,925, the November low.

Any recovery would first need to rise above 4,375 (the horizontal support), as well as 4,430 (the 200 SMA and the rising trend line resistance). Above here, 4500 comes into focus ahead of 4625 for the 50 SMA.

DAX falls as Middle East tensions and rate hike fears weigh

The DAX, along with its European peers, opened sharply lower on Monday as renewed tensions in the Middle East and growing expectations of higher interest rates weighed on investor sentiment.

Israel and Iran exchanged missile strikes despite President Trump's calls for an end to hostilities and a return to peace talks. The escalation pushed oil prices more than $4 per barrel higher, reviving inflation concerns and raising fears that elevated energy costs could further weaken global growth.

Rising oil prices are particularly problematic for Europe, which remains heavily reliant on imported energy. Higher energy costs risk squeezing both consumers and businesses, adding to the challenges facing an already fragile economy.

Meanwhile, Treasury yields are rising following stronger-than-expected U.S. jobs data, reinforcing expectations that the Federal Reserve could raise interest rates later this year. Higher global borrowing costs tend to weigh on equity valuations and risk appetite.

The ECB is also expected to raise interest rates on Thursday in an effort to contain inflation. However, policymakers face an increasingly difficult balancing act as inflation remains elevated while economic growth continues to slow.

Those concerns were reinforced by data showing German factory orders fell 3.8% month-on-month in April, significantly worse than the 2.0% decline expected, and reversing part of March's revised 4.5% increase.

The weaker-than-expected data add to evidence that Germany's economy is losing momentum. Combined with last month's weak PMI figures, which showed business activity contracting amid rising energy costs, the data increase the risk that Europe's largest economy could struggle to grow in the second quarter.

DAX forecast- technical analysis

After running into resistance at 25,450, the DAX has rebounded lower, breaking below the rising trend line support. It's 20 SMA and dropping to 24,330. The long lower wick on today's candle is an encouraging sign, as is the 50 SMA crossing above the 200 SMA. However, momentum is slowing.

Should momentum pick up, buyers will need to get above 24,700, the 20 SMA, to bring 25,000 into focus before looking back up towards 25,500 and fresh record highs.

Sellers would need to break below the 200 SMA at 24,180 to gain traction and bring 23,900 into focus ahead of 23,650. A break below here creates a lower low and could spark a deeper decline.