Gold attracts new buyers, reversing some of the overnight rapid drop from the record high.
The gold market (XAUUSD) had a stunning turnaround on Monday. Retracing about $125 after first rallying to a new all-time high in the $2,144 2,145 range.
However, the steep decline paused near $2,020 due to growing recognition. That interest rates in the United States (US) had peaked. Furthermore, the markets have The Federal Reserve (Fed) has been pricing in an eventual dovish tilt. And a higher probability of a rate drop by March 2024.
Fed rate cut bets drive down US bond yields, weighing on the USD and lending some support.
Meanwhile, dovish Fed predictions cause a new leg down in US Treasury bond yields. Preventing the US Dollar (USD) from capitalizing on the previous day’s robust advance up to a one-week high. This, in turn, is considered as a crucial factor acting as a tailwind for the price of non yielding gold. Apart from that, rising geopolitical concerns in the Middle East and China’s troubles propelled the safe-haven precious metal back to the $2,035 level during Tuesday’s Asian session.
It remains to be seen, however, whether the gold price can capitalize on the minor intraday increase. Traders may opt to sit on the sidelines and avoid placing new directional bets. Ahead of this week’s big US macro news. The ISM Services PMI and JOLTS Job Openings figures for the United States are scheduled to be released later this Tuesday. The ADP report on private-sector employment will come next. Ahead of the much regarded Nonfarm Payroll (NFP) on Friday.
Daily Market Movers: The gold price continues to benefit from dovish Fed expectations and a milder risk tone.
A confluence of supportive variables helps the gold price regain some positive traction on Tuesday. Halting the overnight strong retracement decline from the $2.144-2,145 region, or the record high.
The bullish private survey is overshadowed by geopolitical worries. And concerns over a new epidemic in China. from China, indicating that business activity in the services sector expanded more rapidly in November.
Moreover China’s Caixin Services PMI increased from 50.4 in October to 51.5 in November. Exceeding market estimates of 50.8, albeit it remains considerably below pre-COVID levels.
Despite Federal Reserve Chair Jerome Powell’s aggressive words on Friday. Markets are confident that the US central bank has reached the end of its rate-hiking cycle and may begin lowering by the first half of next year.
The CME Group’s FedWatch Tool predicts that the Fed will cut interest rates in March 2024, dragging down US bond yields and acting as a headwind for the US Dollar.
The risk off sentiment boosts the safe haven metal even more ahead of this week’s critical US macro data.
Concerns about a deteriorating global economy. Investors’ desire for risky investments is being dampened by the forecast. Which is driving some flows toward the considered traditional safe haven precious metal.
Furthermore Traders are now looking for short term opportunities in the US ISM Services PMI. Which is predicted to rise to 52 in November from 51.8 the previous month.
Moreover The spotlight, however, will remain on the release of monthly jobs data in the United States. Known colloquially as the NFP report, on Friday. Which will throw more light on labor market conditions.
