Gold price continues to draw refuge flows despite political uncertainity.
Gold (XAUUSD) expected to oscillate in a narrow range during Thursday’s Asian session, consolidating recent significant gains to a new high. The US Dollar (USD) attracted some dip-buying and appears to have paused its corrective decline from a three-month high amid bets for a slower pace of rate cuts by the Federal Reserve (Fed), strengthened. Strong economic data.
US bond yields boosts USD demand while capping precious metals.
The concerns over growing US fiscal deficit, is pushing US Treasury bond yields higher and limiting the upside for the non-yielding yellow metal on the back of somewhat overbought conditions on the daily chart.
Traders also appear hesitant to initiate new optimistic wagers on the gold price, preferring to wait for the release of the US Personal Consumption Expenditure (PCE) Price Index. Aside from that, the carefully anticipated US Nonfarm Payrolls (NFP) report on Friday will be scrutinize for hints regarding the Fed’s interest rate outlook, which will boost demand for the precious metal. Meanwhile, any major corrective drop for the XAUUSD appears difficult in the aftermath of prolonged safe-haven. Demand is driven by political instability in the United States ahead of the November 5 presidential election, as well as Middle Eastern tensions.
Daily Market Movers: US political uncertainty and global threats continue to bolster the gold price.
Automatic Data Processing (ADP) announced on Wednesday that private sector businesses added 233K new positions in October, up from the previous month’s upwardly revised number of 159K and exceeding consensus predictions.
The numbers point to a stable labor market, which, together with a recent string of encouraging US data, suggests that the economy still on solid ground and supports the Federal Reserve’s prospects for a less aggressive easing.
Separately, the US Bureau of Economic Analysis’ preliminary estimate stated that the world’s largest economy grew by 2.8% During the third quarter, annualized growth was weaker than the 3% reported from April to June.
The markets are still pricing in a regular 25 basis point interest rate decrease by the Fed in November, which, along with concerns about deficit spending following the US election, pushing US Treasury bond yields up on Thursday.
The yield on the benchmark 10-year US government bond stands just below 4.3%, reaching its highest level since July, boosting US Dollar demand and acting as a headwind for gold prices under slightly overbought conditions.
Traders are now anticipating the release of the US PCE Price Index for some significant momentum.
The release of the US Personal Consumption Expenditure (PCE) Price Index on Thursday could affect the Fed’s rate-cutting course and drive USD demand, which, in turn, should provide some real stimulus to a commodity.
The uncertainty surrounding next week’s US presidential election, as well as growing geopolitical tensions in the Middle East, suggest that the safe-haven precious metal will continue to rise.
