September 2, 2024
New Delhi, India
Gold Prices
Gold (XAU/USD) continues to trade in a narrow range above $2,500 on Monday, despite mixed market signals. Asian stocks declined due to concerns over China’s economic growth, following the release of mixed Manufacturing Purchasing Managers Index (PMI) data. While China’s official NBS Manufacturing PMI fell further into contraction territory, the Caixin Manufacturing PMI rose into expansion, beating market expectations.
Gold’s Upside Capped by US Dollar Recovery:
Gold’s price gains are currently limited by the recovery of the US Dollar (USD). The USD has rebounded from its year-to-date lows, which were touched last Tuesday when the US Dollar Index (DXY) fell to 100.52. As of now, the DXY is trading in the 101.60s following the release of the US Personal Consumption Expenditures (PCE) data for July, which showed inflation remained unchanged from the previous month. This data reassured markets that the US economy may be headed for a “soft landing” rather than a “hard landing.”
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Interest Rate Outlook Remains Key:
The outlook for US interest rates, a critical factor for gold prices, remains largely unchanged. The CME FedWatch Tool indicates that the probability of a 50 basis point (bps) rate cut in September stands slightly above 30%, with a 25 bps cut fully priced in.
Upcoming US Data in Focus:
Trading conditions are expected to be light on Monday due to the Labor Day holiday in the US and Canada. However, all eyes will be on the upcoming US labor market data, particularly the Nonfarm Payrolls (NFP) report due on Friday. This data could be pivotal in determining whether the Federal Reserve (Fed) opts for a more aggressive 50 bps rate cut or a standard 25 bps reduction in its next policy meeting.
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Gold remains range-bound above $2,500, influenced by a recovering US Dollar and anticipation of key US economic data. The market will closely watch the labor data released this week, especially the NFP report, for cues on the Federal Reserve’s next move regarding interest rates.
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