September 9, 2024
New Delhi, India
Gold Prices
Gold prices (XAU/USD) are under selling pressure for the second consecutive day, staying below the $2,500 psychological mark during early European trading on Monday. The recent mixed US jobs report has reduced the probability of a larger 50 basis point rate cut by the Federal Reserve (Fed), leading to a modest recovery in US Treasury bond yields. This uptick supports the US Dollar (USD), driving investors away from the non-yielding precious metal.
Key Factors Affecting Gold Prices:
- Reduced Expectations for Fed Rate Cut: The mixed US Nonfarm Payrolls (NFP) data released on Friday lowered the chances of a 50 basis point rate cut by the Fed, leading to a rise in US Treasury yields and a stronger USD. This shift has pressured gold prices, as a stronger dollar makes gold less attractive to foreign investors.
- Economic Concerns and Geopolitical Tensions: Concerns about a potential economic downturn in the US, coupled with ongoing geopolitical tensions such as the lack of progress in ceasefire negotiations between Israel and Hamas, continue to support gold prices. These factors limit further downside risks for the safe-haven metal.
Also Read: USDINR Today: Rupee Strengthens Amid Reduced Chances of Aggressive Fed Rate Cuts
Market Movements and Data Insights:
- US Labor Market Data: The US Bureau of Labor Statistics reported that Nonfarm Payrolls rose by 142,000 in August, below the expected 160,000. The Unemployment Rate fell to 4.2% from 4.3%, while Average Hourly Earnings rose to 3.8% from 3.6%, indicating mixed signals about the health of the labor market.
- Fed Rate Cut Expectations: According to the CME Group’s FedWatch tool, markets currently price a 70% chance of a 25-basis-point rate cut by the Fed later this month, with a 30% probability for a 50-basis-point reduction. This moderation in rate cut expectations has supported the USD, creating headwinds for gold.
- US Dollar Dynamics: The US Dollar, which initially fell after the jobs data, regained strength and traded slightly higher during the Asian session on Monday, further weighing on gold prices.
- Global Gold Holdings: Data from the People’s Bank of China (PBOC) showed the country’s gold reserves at 72.8 million fine troy ounces at the end of August, unchanged for the fourth consecutive month, indicating a stable stance in gold holdings.
Also Read: Jio Financial Services Partners with BlackRock for Investment Advisory Services
Outlook:
While the reduction in Fed rate cut expectations and a stronger USD are currently weighing on gold prices, concerns about a potential US economic slowdown and geopolitical uncertainties may offer support to the yellow metal.
Gold prices face near-term pressure due to stronger US bond yields and a robust USD. However, ongoing economic concerns and geopolitical tensions are likely to provide a buffer against significant downside risks. Investors should stay cautious and monitor upcoming economic data and geopolitical developments closely.
Disclaimer:
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