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MENAFN- Daily Forex)
Recent selling pressure since the beginning of September has pushed the gold price below the significant $2500 per ounce level, with losses extending to the $2473 per ounce support level before stabilizing around $2480 per ounce at the time of writing. Gold prices continue to retreat from their all-time highs last week as investors await US economic data to refine their expectations for the magnitude of US interest rate cuts by the Federal Reserve. Key focal points this week include ISM surveys, JOLTS job openings, the ADP employment report, and non-farm payrolls.
Previously, several Federal Reserve officials have recently highlighted the growing risks to the Labor market. Meanwhile, the latest US inflation data has dampened expectations of a 50-basis point interest rate cut by the Federal Reserve in September, according to the economic calendar, with core personal consumption expenditures prices rising 0.2% in July, in line with expectations.
In general, financial markets still expect the US Federal Reserve to cut interest rates by 100 basis points during its remaining three meetings this year, which would lower the opportunity cost of holding non-interest-bearing assets. In Europe, the European Central Bank is also expected to cut rates, given the sharp slowdown in inflation reported in preliminary figures for August.
As for the factors affecting the gold market, the US dollar price is at a nearly two-week high. According to trading, the US dollar index rose slightly to 101.8 on Tuesday, its highest level in about two weeks, as traders assess the economic and monetary outlook. The first major indicator released this week, the ISM manufacturing PMI, showed that US factory activity contracted for the fifth consecutive month. Meanwhile, at a slightly faster pace than expected, raising concerns once again about the impact of higher interest rates on the health of the US economy.
Currently, traders are awaiting more economic data due this week, including the JOLTS and the US jobs report, to shed light on the performance of the Labor market and inform the likely size of the Fed's expected rate cut this month.
Investors had fully priced in the September 18 cut in borrowing costs, with the odds of a 50-basis point cut at around 40%, compared to around 60% for a smaller 25 basis point cut. According to forex trading, the US dollar mostly rose against the Australian dollar but lost nearly 1% against the yen.
Another factor affecting the gold market , the yield on the US 10-year Treasury note fell below 3.85%, not far from the 14-month lows tested throughout August, as a batch of economic data was in line with expectations of a US rate cut by the Fed this year. The Institute for Supply Management data showed that US manufacturing activity fell more than expected in August, reinforcing the sector's weak momentum and challenging the view that the US economy is still holding up somewhat in the face of high borrowing costs. On the other hand, dovish bets were limited by a sharp increase in producer prices.
Overall, the economic data preceded the key jobs report due later in the week, which is set to provide updates on how the Labor market is holding up in the face of a pessimistic July report and an aggressive downward revision to the number of payrolls for the year ending March 2024. The culmination of the two events ultimately resulted in a dovish turn in the Federal Reserve's speech at the Jackson Hole Economic Symposium.
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According to gold analysts' forecasts, the gold price is leaning towards taking new buying positions amid profit-taking, and the next important support levels will be 2450 and 2429 dollars per ounce, respectively. Conversely, and on the same timeframe, the daily chart will still consider the psychological resistance of $2500 per ounce as a symbol of the extent of the bulls' control over the trend. The gold price may remain within its current range until markets and investors react to the announcement of US jobs figures, which will have a strong and direct impact on interest rate decisions and consequently on the US dollar price.
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