• Mon. Jul 15th, 2024

Gold’s Price Stays the Same as Buyers Wait for the US Manufacturing PMI

Leon Kramer

ByLeon Kramer

Aug 1, 2023

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  • The price of gold eagerly awaits the release of US economic data to assess its following significant action.
  • The US Dollar Index continues to follow a positive path, driven by the current state of the labor market, which is expected to prompt the Federal Reserve to implement further interest rate increases.
  • The manufacturing sector in the US appears to be experiencing contraction for the ninth consecutive month, coinciding with an ongoing period of assertive rate-tightening measures.

The XAU/USD pair finds support near the $1,950.00 level, as the strong performance of the United States during the April-June quarter was counterbalanced by weak consumer spending data. The value of the precious metal is influenced by the US Dollar’s gains from positive Gross Domestic Product (GDP) figures and a solid Durable Goods Orders report.

Factory activities in the United States have experienced a contraction over the past eight months, which can be attributed to the ongoing aggressive rate-tightening measures implemented by the Federal Reserve (Fed). The manufacturing sector is anticipated to maintain a challenging performance as companies face difficulties in accessing credit amidst the dual challenges of increased interest rates by the Federal Reserve and stricter credit conditions among regional banks in the United States.

The Price of Gold Goes Back Up Strongly Before the US Manufacturing PMI

  • The price of gold is experiencing some downward pressure above the $1,960 mark as investors redirect their attention toward the upcoming release of the July Manufacturing PMI by the United States Institute of Supply Management (ISM). This report is scheduled to be published on Tuesday at 14:00 GMT.
  • According to the latest data, there has been an increase in the Manufacturing PMI from June’s reading of 46.0 to 46.5. Despite an increase in factory activities, it is anticipated that the Manufacturing sector will continue to experience a contraction phase. It is worth mentioning that a value below 50.0 is typically regarded as contractionary, and this particular occurrence would mark the ninth consecutive contraction.
  • In the meantime, it is observed that the New Orders Index indicates a projected decrease in forward demand to 44.0, compared to the previous release of 45.6.
  • The US factory sector is impacted by increased interest rates implemented by the Federal Reserve.
  • During the upcoming week, there is anticipation for significant activity in the Gold market due to the release of US factory data and the Automatic Data Processing (ADP) Employment Change data. The latter is scheduled to be released on Wednesday at 11:45 GMT.
  • The US Dollar Index faced challenges in reclaiming the significant resistance level of 102.00, as the core Personal Consumption Expenditure (PCE) price index, favored by the Federal Reserve as a measure of inflation, showed signs of softening.
  • The core PCE price index in the US experienced a 0.2% increase in June, aligning with market expectations. However, it displayed a slower growth rate than the 0.3% recorded in May. The annualized economic data experienced a slight softening, coming in at 4.1%, slightly below the anticipated 4.2%, and the previous release of 4.6%.
  • Following the recent decision by Fed policymakers to maintain their reliance on incoming data for future interest rate actions, there has been a notable surge in the significance of economic indicators.
  • In the previous week, the Q2 Gross Domestic Product (GDP) data in the US exhibited resilience in the face of a competitive labor market and exceptional consumer spending. The GDP of the United States experienced a growth of 2.4% from April to June, surpassing the anticipated 1.8% projection.
  • Despite the Federal Reserve’s assertive measures to tighten policies, the second quarter’s exceptional performance suggests robustness in the labor market and consumer demand.
  • According to Fed policymakers, there is a sense of confidence regarding the US economy’s resilience against recession, attributed to the ongoing strength in labor demand.
  • In July, there was a notable improvement in Consumer Sentiment, with a reading of 71.6, the highest since October 2021. However, it fell short of the expected reading of 72.6.
  • The alleviation of inflationary pressures and robust employment conditions continue to play significant roles in enhancing household sentiment.

The Price of Gold Is Getting Closer to $1,970

The price of gold is currently maintaining a steady position near the 20-day Exponential Moving Average (EMA) at approximately $1,955.00. This occurs when investors focus on factory activities and labor market data. On an hourly time frame, a bearish divergence is observed in the Gold price, which may be activated upon a breakdown below the significant support level of $1,940.00. The manifestation of a similar event could steer the Gold price towards a bearish path.

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Leon Kramer

Leon Kramer

Leon Kramer, a renowned financial author, enlightens Main Forex News readers with his deep understanding of currency markets. His years in global finance, combined with an intuitive grasp of trends, delivers insightful, up-to-the-minute foreign exchange analysis.

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