Gold Price stays on the front foot, edging higher of late, while bracing for the first positive week in five as risk-on mood joins a pullback in the United States Treasury bond yields. In doing so, the XAU/USD ignores the firmer US Dollar, as well as receding optimism about the US-China ties.
The risk appetite remains firmer, despite recent anxiety, as the US data flashes mixed outcomes and challenges the hawkish bias about major central banks. Adding strength to the upbeat sentiment, as well as a likely increase in the Gold demand, could be China’s readiness for more stimulus to defend the world’s second-biggest economy, as well as one of the top XAU/USD customers, from witnessing a hard landing.
On Thursday, US Durable Goods Orders for July marked the biggest slump since April 2020 by posting -5.2% MoM figure versus -4.0% expected and 4.4% prior growth (revised). However, the Durable Goods Orders ex Transportation marked a positive surprise with 0.5% figures versus 0.2% market forecasts and previous readings. Further, the Nondefense Capital Goods Orders ex Aircraft also improved to 0.1% while matching the analysts’ estimations compared to -0.4% marked in June.
Additionally, the Chicago Fed National Activity Index for July improved to 0.12 from -0.33 prior whereas the Kansas Fed Manufacturing Activity Index for August was 12.0 versus -20.0 previous readings.
It’s worth noting that the weekly figures of the Initial Jobless Claims and Continuing Jobless Claims eased and signaled positive employment conditions.
Not only the upbeat details of the US data but hawkish comments from former St. Louis Federal Reserve President James Bullard also underpinned the US Dollar’s post-data rebound. “The reacceleration could put upward pressure on inflation and thus makes it impossible for the Fed to start cutting rates anytime soon,” said Fed’s Bullard in an interview with Bloomberg.
While Bullard was hawkish, Federal Reserve Bank of Philadelphia President Patrick Harker teased an end of rate hike trajectory whereas Boston Federal Reserve President Susan Collins defended a “higher for longer” bias for rates.
Earlier in the week, downbeat readings of the top-tier economies’ Purchasing Managers Index (PMI) for August renewed concerns about the sooner end of the major central banks’ hawkish monetary policy cycle, which in turn triggered the risk-on mood and favored the Gold Price.
Elsewhere, the upbeat performance of the US technology shares also underpins the market’s optimism and favors the XAU/USD buyers despite a firmer US Dollar.
Alternatively, US-China optimism appears to fade as the Chinese Commerce Ministry said in a statement on Thursday, “China will state its stance on economic and trade matters of concern,” while adding that they will push financial institutions to expand credit to businesses. China’s Commerce Ministry also called on the US to cancel potential arms sales to Taiwan, which in turn flagged fears of geopolitical tension when US Commerce Secretary Gina Raimondo visits Beijing next week.
Amid these plays, the US Dollar Index (DXY) remains firmer around the highest level in 11 weeks while the benchmark US 10-year Treasury bond yield prints mild weekly losses despite rising to the highest level since 2007 earlier in the week, as well as posting firmer closing the previous day.
Additionally, the Wall Street benchmarks closed in the red after an initially positive start as the Fed talks and United States data teased policy hawks.
To sum up, the Gold Price regains the buyer’s attention ahead of the top-tier data/events but the reversal of a five-week-long bearish trend needs strong fundamental support
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