In Asian hours on Monday (July 3), spot gold traded in a narrow range, currently trading around $1915.02 / ounce, as the market still expects the Fed's interest rate hike path to be more hawkish. Gold rebounded sharply on Friday, hitting a three-session high of $1,922.61 an ounce before closing at $1,919.02, as weaker-than-expected U.S. PCE data and a slowdown in consumer spending, the dollar index retreated from a near 2-1/2-week high, and U.S. Treasury yields weakened slightly, giving gold a chance to rebound.

This week will be a super week, on the one hand there is the ISM manufacturing and non-manufacturing PMI data, as well as the "small non-farm" ADP data and the US non-farm payrolls report, on the other hand, there will be the release of the Federal Reserve meeting minutes and a number of Fed voting committee speeches.

But the market for the Federal Reserve to raise interest rates in July is still high expectations, the survey showed that analysts on the future trend of gold is widely divided, while the proportion of retail investors who are bearish gold is slightly higher.

According to CME's Fedwatch tool, investors see an 84 percent chance of a 25 basis point rate hike in July, with the possibility of another 25 basis point hike in November, bringing rates to 5.5 percent to 5.75 percent, followed by a cut in 2024.

This trading day coincides with the United States Independence Day holiday, the United States stock market closed early, it is estimated that the gold market in New York late trading will be limited, but the day will be released in the United States June ISM manufacturing PMI data, investors still need to focus on, in addition, need to pay attention to Europe and the United States in June manufacturing PMI data final value. On Tuesday (July 4), the US stock market will be closed for Independence Day, and the gold market will be closed early.

U.S. consumer spending slowed in May, with the PCE price index rising at its smallest year-over-year pace in more than two years

U.S. consumer spending slowed in May as households cut back on purchases of new light trucks and other durable manufactured goods amid higher borrowing costs, suggesting the economy lost some momentum in the second quarter.

While a Commerce Department report on Friday showed annual inflation fell to its lowest level in more than two years in May, core price pressures remain too strong to prevent the Fed from resuming interest rate hikes in July, economists said. So far, inflation remains above the Fed's 2 percent target.

The weakness in consumer spending took some of the luster off a string of upbeat data on the labor and housing markets released earlier this month, which had painted a resilient picture of the economy.

"Recent news of stagnant consumer spending and a slight improvement in inflation data support the Fed's decision to skip a rate hike this month, but core price gains remain sticky and may require the Fed to tap the brakes again in July," said Sal Guatieri, senior economist at Manchi Bank Capital Markets.

On a month-on-month basis, consumer spending rose 0.1 percent in May after a revised 0.6 percent gain in April and 0.8 percent previously reported. Economists polled by Reuters had forecast consumer spending, which accounts for more than two-thirds of U.S. economic activity, rising 0.2 percent in May.

The tight labor market comes as consumer spending remains supported by strong wage growth. Personal income rose 0.4 percent in May, while wages rose 0.5 percent.

Slower inflation is boosting consumers' purchasing power, with real disposable income rebounding by 0.3 per cent. The savings rate climbed to 4.6 percent from 4.3 percent in April, which can provide some cushion in a recession.

However, the outlook is not promising. Most low-income households are believed to have exhausted savings built up during the pandemic.

Inflation has eased as consumer spending has softened. The personal consumption expenditures (PCE) price index rose 0.1 percent in May after rising 0.4 percent month-on-month in April. The PCE price index rose 3.8 percent in May from a year earlier, the smallest year-on-year increase since April 2021, after rising 4.3 percent in April.

Still, core price pressures remain sticky. Excluding the volatile food and energy components, the core PCE price index climbed 0.3 percent in May from a month earlier after rising 0.4 percent in April.

The core PCE price index rose 4.6 percent in May from a year earlier after rising 4.7 percent in April. The Fed tracks the PCE price index when setting monetary policy. Policymakers are closely watching prices of core services, which exclude housing, which economists estimate rose 0.2 percent in May after rising 0.4 percent in April

"With stubborn inflation and consumer spending continuing to be supported by a strong labor market and rising real incomes, we expect the (Fed) to raise rates at least once more and leave the door open for further hikes," said Dana Peterson, chief economist at the Institute.

The dollar retreated from a more than two-week high

During the Asian session on Monday (July 3), the US dollar index traded in a narrow range, currently trading around 102.96. On Friday, the dollar index retreated after hitting a near 2-1/2-week high near 103.55, but it weakened sharply and gave up all of Thursday's gains after data such as the PCE, as data showing a slowdown in U.S. inflation and cooling U.S. consumer spending cast some doubt on the Fed's potential to be aggressive in fighting inflation.

"Consumption is weak, especially when adjusted for inflation," said Brian Jacobsen, chief economist at Annex Wealth Management. "Spending on goods is down and even spending on services looks to be down. Inflation is coming down. However, inflation has a long way to go to fall towards 2 per cent."

The dollar index fell 0.41% to 102.92 on Friday, ending the week nearly flat, up about 0.05%.

Earlier this week, the dollar index continued to rebound, so the comments of former Fed Chairman Jerome Powell and solid economic data reinforced the market's expectations of two more rate hikes this year, while lowering the expectation of a possible rate cut before the end of the year.

According to CME's FedWatch tool, the probability of a 25 basis point rate hike at the Fed's July meeting fell slightly after the release of the US PCE data for May, and the market now puts the probability of a rate hike at 84.3 per cent, compared with 89.3 per cent last Thursday.

Goolsbee, president of the Chicago Fed, said he and his colleagues would sift through the "flood of data" coming out between now and the Fed's meeting at the end of July to assess whether further increases in borrowing costs are needed to bring down inflation.

The dollar index rose 0.32% in the second quarter, ending a streak of quarterly declines. The dollar index fell 0.5% in the first half of the year.

Treasury yields remain relatively strong

U.S. Treasury yields fell slightly Friday after consumer spending slowed more than expected in May, but futures still predict the Federal Reserve will resume raising interest rates in July to tame persistently high inflation. They rose slightly Monday and have now recouped most of Friday's losses.

The yield on the 10-year Treasury note is trading around 3.838%, up about 0.5%, after falling 0.83% to close at 0.819% on Friday, when it hit a 3-1/2-month high of 3.893%.

'When the April and May data are put together, it suggests that consumption did slow down quite a bit in the second quarter relative to the first,' said Tom Simons, a money-market economist at Jefferies. The bond market is eyeing the Fed's forecast for two more rate hikes, but "the data is starting to show that it's getting harder for consumers to maintain [spending levels]."

"Without the consumer driving growth further, that suggests more downside risks to the growth picture, so the Fed may end up not raising rates a second time," he said.

Gennadiy Goldberg, head of U.S. rates strategy at TD Securities in New York, said it was difficult for the market to interpret Friday's slew of data releases. "The most important one in this series is the weakness of the core PCE data, especially the core of the core, which is the price index of core services other than housing."

Yellen said the U.S. economy, while cooling slightly, could push inflation back down while the labor market remained healthy

U.S. Treasury Secretary Janet Yellen said on Friday that the U.S. economy is on a path to keep the labor market strong while inflation falls, even as the economy cools.

In remarks prepared for a residential solar company in New Orleans, Yellen said strong household and business balance sheets and a continued surge in factory production would be a source of strength for the U.S. economy.

Yellen said the US economy has defied persistent predictions of a recession this year and proved more resilient than expected. She is on a campaign visit to New Orleans, championing President Joe Biden's economic agenda.

At the PosiGen Solar Plant, Yellen said, "I still believe there is a path to push inflation down while maintaining a healthy labor market." Without taking lightly the significant risks ahead, the evidence we have seen so far suggests we are on that path."

Yellen said business executives have increasingly expressed confidence in the U.S. economy.

"While some parts of our economy are slowing, households are spending at a strong pace and businesses are continuing to invest," she said. "Looking ahead, I expect the current strength of the labor market and strong household and business balance sheets to be a source of strength for the economy, even if our economy does cool off a bit as inflation falls."

Euro zone inflation fell again in June as energy prices plunged

Eurozone inflation continued to fall in June as falling fuel costs outweighed an acceleration in the price of services, preliminary data showed on Friday.

The data showed only a minimal fall in underlying inflation, but is unlikely to sway the ECB's stance. The European Central Bank is expected to raise interest rates for the ninth time in a row in July and is considering another hike in September.

The euro zone's preliminary consumer price reconciliation index (HICP) rose 5.5 percent in June from a year earlier, down from 6.1 percent in May and the seventh decline in the past eight months, with Germany the only country to report an increase, Eurostat's preliminary estimate showed.

"Inflation is still high and sticky, but the momentum is slowing," said Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management.

But "core" inflation, which excludes energy and food, fell only to 6.8 per cent from 6.9 per cent - far short of the sustained decline the central bank would like to see. ECB policymakers see it as a better measure of underlying inflation trends.

Ulrike Kastens, European economist at DWS, said: "Core inflation is likely to remain above 5% in the coming months, which will [require] further ECB rate hikes."

Services were the only category in which price growth accelerated - from 5.0% to 5.4%- suggesting that consumers remained resilient in the face of higher borrowing costs, largely thanks to a strong Labour market.

Eurostat reported separately Friday that the eurozone's unemployment rate remained at a record low of 6.5 percent in May.

The ECB raised interest rates to a 22-year high in June as it forecast inflation would remain above its 2 percent target until the end of 2025.

Inflation remains widely divergent across the eurozone, with headline inflation falling to just 1.6 per cent in Spain and Belgium in June, 1.0 per cent in Luxembourg and in double digits in Slovakia (11.3 per cent).

Germany's headline inflation rate rose from 6.3% to 6.8%, driven in part by last summer's hefty train ticket subsidies. The subsidy was not renewed this year.

Fed paper: US financial conditions are tightest in more than a decade

The financial sector is inflicting the biggest hit on US economic activity since the financial crisis more than a decade ago, according to a new paper published by the Federal Reserve on Friday.

The finding is part of the researchers' work to build a new financial conditions index that aims to measure how a wide range of financial factors affect overall economic activity.

Based on the latest findings of their work, "financial conditions are estimated to subtract about three-quarters of a percentage point from gross domestic product growth next year," the economists wrote in the paper. They added that their FCI-G index, a pulse of financial conditions for growth, was at its "tightest level" since the onset of the 2008 global financial crisis pushed the global economy to the brink of collapse.

The authors write that since late 2021, falling stock prices, sharply higher interest rates, including those affecting home loans, and a stronger dollar have helped tighten financial conditions. The paper notes that in the second half of 2022, "the biggest headwinds to future growth" came from short - and long-term interest rates and the dollar, "while the past appreciation of house and stock prices recorded during the pandemic continued to be a driver of [GDP] growth."

The launch of the new index comes at a time when many similar indicators already exist in the market, both private and public. The authors note that the index they constructed is "broadly consistent" with the way the Fed's internal economic models "typically correlate key financial variables to economic activity." They also say the new index does a better job of tracking the impact of past changes in financial variables than other indicators of financial conditions, or FCI.

The paper also points out that the new index is now not exactly at the same level as the others. "In recent months, divergences have emerged between the FCI-G and other FCIS, reflecting the lag of a rapid and sustained tightening of financial conditions in 2022 as a headwind to future GDP growth," the authors wrote.

Given that changes in monetary policy affect the economy by affecting financial conditions, financial conditions are a key focus for the Fed. The Fed has raised interest rates aggressively over the past year to cool inflation and tried to tighten financial conditions to slow economic activity.