Gold sustained near a two week high on mounting Fed rate cut bets.
Gold (XAUUSD) attracts some buyers for the second day in a row on Thursday, looking to build on the overnight strong advance to a nearly two-week high. The US macro statistics released on Wednesday indicated signals of labor market weakness and a slowing economy. Furthermore, the minutes of the recent FOMC meeting revealed that the majority of officials believe US economic growth is progressively slowing. This supports predictions that the Federal Reserve (Fed) will cut interest rates in September, causing a dramatic drop in US Treasury bond yields and pushing the US Dollar (USD) to a three-week low. Furthermore, global concerns, as well as political uncertainties in the United States and Europe, point to the non-yielding yellow metal taking the route of least resistance to the upside.
Geopolitics, combined with political uncertainty, offers support to the XAUUSD.
However, the underlying strong optimistic attitude in global equities markets may act as a headwind for the safe-haven gold price, since trade volumes are expected to be lower due to the US Independence Day holiday. Traders also appear reluctant and may prefer to wait for the release of the closely-watched US monthly employment figures, widely known as the Nonfarm Payrolls (NFP) report – on Friday, before putting new directional bets. Nonetheless, the fundamental backdrop appears to be firmly in favor of bulls, indicating that the XAU/USD could appreciate more in the near future.
Daily Market Movers: Gold continues to draw support from September Fed rate decrease bets.
The incoming lower US macro data raises market bets on the Federal Reserve’s rate-cutting cycle beginning later this year, which continues to operate as a tailwind for the non-yielding gold price.
Automatic Data Processing (ADP) stated on Wednesday that private-sector employment in the United States increased by 150,000 in June, compared to 157,000 the previous month and estimates of 160,000.
Separately, the Labor Department reported the number of Americans who applied for unemployment benefits. Last week, it reached a two-and-a-half-year high, indicating evidence of easing labor market conditions.
Institute for Supply Management’s (ISM) Services PMI fell into contraction territory in June.
Furthermore, the Institute for Supply Management’s (ISM) Services PMI fell into contraction territory in June, coming in at 48.8, its lowest level since May 2020 and below consensus projections.
The report also indicated a lack of momentum in the economy at the end of the second quarter, supporting predictions that the Fed will slash borrowing prices in September and again in December.
Meanwhile, the minutes of the June 11-12 FOMC meeting revealed that the clear majority of officials believed the US economy was slowing and price pressures were moderating.
Officials, however, contended that additional favorable data was necessary to give them more confidence that inflation was steadily advancing toward the 2% objective before lowering interest rates.
US Treasury bond yields fell for the second day in a row on Wednesday, wiping away the Donald Trump and French election-fueled jump at the start of the week and hurting the US dollar.
Investors are now anticipating the release of the US Nonfarm Payrolls (NFP) report on Friday for clues about the Fed’s future policy decision, which will impact the Gold near term trend.
