- Gold pulled back from its all-time peak of $2,531 as US Treasury yields climbed, with the 10-year note increasing by 6.5 basis points to 3.865%.
- Recent data from the United States reveals a combination of positive and negative indicators. While there has been an increase in jobless claims, business activity remains strong, even in the midst of ongoing contraction in the manufacturing sector.
- The minutes released by the Federal Reserve suggest a rate reduction in September. However, the Gold market is facing downward pressure due to the strength of the US Dollar.
The price of Gold declined on Thursday after a period of significant gains over the past five days, reaching a record high of $2,531. However, during Thursday’s session, XAU/USD dropped below the previous all-time high of $2,483.
An increase in US Treasury bond yields after the data release in the United States (US) boosted the value of the US dollar and had a negative impact on the price of Gold. The XAU/USD is currently trading at $2,482, experiencing a decrease of more than 1%.
According to data from the US Bureau of Labor Statistics (BLS), the number of Americans applying for unemployment benefits exceeded expectations and surpassed previous figures. Additional data indicated that Business Activity remains robust despite a decline in manufacturing activity for the second consecutive month, as reported by S&P Global.
Bullion traders carefully analyzed the Minutes from the Federal Open Market Committee’s (FOMC) recent meeting, which were unexpectedly revealing. The Minutes indicated that a significant number of FOMC participants were in favor of implementing policy measures to stimulate the economy in September, provided that the data aligned with expectations.
The Minutes indicated that policymakers had become more assured that there were greater chances of lower inflation while the risks of attaining maximum employment had increased.
Boston Fed President Susan Collins expressed similar sentiments, stating that the job market is robust and suggesting that a reduction in interest rates would be suitable in the near future. Recently, Patrick Harker of the Philadelphia Federal Reserve agreed with Collins regarding the need to ease policy. However, Harker emphasized the importance of a systematic approach to reducing interest rates.
Regardless of Collins’ and Harker’s predictions that the Federal Reserve may issue its first interest rate cut, the metal stubbornly sank. The dollar was bolstered as bond rates in the US rose, with the benchmark 10-year bond seeing a particular gain of 6.5 basis points (bps) to 3.865%. With a rise of 0.39 percent, the DXY reached 101.52, tracking the strength of the USD relative to six other currencies.
With the current situation at hand, investors are getting ready for Fed Chair Jerome Powell’s commencement speech at Jackson Hole. He is anticipated to establish the foundation for monetary policy for the latter part of 2024.
Gold Price Under Pressure After Release of US Data
- Considering the underlying circumstances, the decline in Goldd below $2,500 before Powell’s speech could be attributed to investors taking profits.
- Following the latest data, traders adjusted their predictions for the extent of the Federal Reserve’s monetary easing in 2024. Specifically, the expectations decreased from approximately 102 basis points to 94 basis points, as indicated by the Chicago Board of Trade (CBOT) December 2024 fed funds rate futures contract.
- The number of US Jobless Claims increased to 232K in the week ending August 17, exceeding both the projected figure of 230K and the previous week’s count of 228K.
- The S&P Global Manufacturing PMI has once again contracted, dropping to 48.0. On the other hand, the Services PMI has risen to 55.2, surpassing expectations.
- In August, there was a 1.3% increase in US Existing Home Sales, which was in line with expectations. The number of sales rose from 3.9 million to 3.95 million.
Gold’s Upward Trajectory Remains Unbroken, Even Though It Has Given Up $2,500
The upward trend of Gold continues to hold; however, if the daily close is below the previous all-time high of $2,483, it could potentially lead to a more significant decline.
Although the Relative Strength Index (RSI) is showing a bullish trend, it is currently pointing downwards, suggesting that sellers have the advantage in the short term. However, traders need to note that Gold shows a bullish trend in the mid-term.
If XAU/USD manages to close below the $2,500 mark for the day, sellers might drive prices toward the peak of $2,450 reached on May 20. After surpassing that level, additional losses are expected, potentially causing Gold to decline to the 50-day Simple Moving Average (SMA) of $2,398 and then potentially testing the next support at the 100-day SMA of $2,377.
Alternatively, should buyers push Gold beyond the $2,500 mark, anticipate a re-examination of the all-time high at $2,531.