Gold Resumes Gain Today Amid Growing Concerns About The Future Of The US Economy

(MENAFN- Investor Ideas) Investorideas, a go-to platform for big investing ideas releases market commentary from Samer Hasn, Senior Market Analyst at XS

Gold continues its rise today, regaining the level of $2945 per ounce, thus approaching the record high it had recorded last week near $2955.

The continuation of the general upward trend in gold recently coincided with the influx of a set of negative signs about the future of economic activities and the labor market in the US. These sources of uncertainty are added to those prevailing globally with anticipation of developments in the trade war between the US and the world.

On Friday, we witnessed the preliminary S&P Global's PMI report for February. Where services activities contracted unexpectedly, and business optimism fell to the lowest level since December 2022 amid the prevailing uncertainty since Donald Trump took office as president of the White House. While this declining sentiment comes with concerns about the fate of the federal government, spending and tariffs, in addition to concerns about rising prices and geopolitical tensions, according to the report.

On the same day, we also saw the final results of the University of Michigan Consumer Sentiment survey, where the headline index was lower than reported earlier this month. The survey results indicated a deterioration in consumers' expectations about the economy in the short and long term, personal finances and a decline in purchases of durable goods. On the other hand, inflation expectations for the coming year remain at 4.3% on an annual basis, in line with the preliminary reading and up from 3.3% in the January survey.

In addition, existing home sales unexpectedly declined in January, deepening concerns about the state of the US housing market, which is one of the most prominent weaknesses in the economy and continues to be negatively affected by relatively high financing costs.

The damage that may be inflicted on the labor market as a result of the reduction in the workforce in government agencies in the US will also get a growing focus and may contribute to fueling uncertainty, which is an additional factor supporting gold's gains.

The number of jobs lost because of the reduction in the size of the federal government is expected to reach 475,000 jobs, representing 20% of the total federal workforce, according to a Wall Street Journal survey. While the job losses at this level would be small compared to the total non-farm workforce of 159 million, they could have indirect implications that are not yet known, according to The Journal.

This week, The Conference Board's Consumer Confidence figures could help to provide a deeper insight into the uncertainty for individuals and households.

The Federal Reserve's preferred measure of inflation, Personal Consumption Expenditures (PCE), will also help to bolster expectations about the Fed's monetary policy path for the rest of this year. While positive inflation surprises and growing signs of monetary tightening are only a temporary pressure on gold, they provide room to buy on a correction followed by a safe-haven-driven rally in light of the above factors.

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