Gold prices find support from falling US Treasury yields and a slight decline in the dollar. The yellow metal recouped its early losses on Monday and rose slightly. Investors are preparing for a 75 basis point rate hike by the US Federal Reserve this week.
“Recession and fall in US interest rates support gold price”
Spot gold was up 0.28% at $1,731.62 at the time of writing after falling 0.3% in early trading. The precious metal hit a one-week high on Friday. U.S. gold futures rose 0.09% to $1,729.
cryptocoin.comAs you follow on , the dollar fell 0.1% against its rivals. This made dollar-priced bullion cheaper for buyers holding other currencies. Meanwhile, benchmark US 10-year Treasury rates were hovering near eight-week lows. Stephen Innes, managing partner of SPI Asset Management, comments:
Following the global recession concerns, the decline in US interest rates supported gold. Today, the Fed is likely to underline the dilemma of fighting inflation at the expense of growth. So we’re likely to see a touch of indecision before the Federal Open Market Committee.
“Gold price is likely to rise further after this critical resistance”
Gold struggles to recapture weekly highs of $1,740 after a tighter recovery. The precious metal gained strength after falling towards the critical support of $1,680.00 last week.
Market analyst Sagar Dua notes that the gold bulls’ stellar two-day recovery resulted in a recovery of more than 3.30% after retesting the 11-month low of $1,679.80. According to the analyst, gold is likely to continue higher after surpassing the critical resistance of $1,730.00.
DXY slumps as chance of 1% rate hike is off the table
Expectations for a 1% rate hike by the Federal Reserve (Fed) fell substantially. After that, the US Dollar Index (DXY) delivered its opening gains on Friday. Due to negative S&P PMI data and lower inflation expectations, the possibility of a 100 basis point (bps) rate hike by the Fed has been reduced.
Long-term inflation expectations fell to 2.8% from 3.1% in June. After that, instead of investing money in a 1% rate hike, investors bet on the Fed’s 75 bps rate hike in a row.
“Negative S&P PMI data is likely to dampen Fed’s hawkishness”
On Friday, S&P released PMI data, which remains pessimistic on key issues. Global Composite PMI came in at 47.5, below expectations of 51.7. The previous data was at 52.3 level. The initial catalyst, broadening towards the Manufacturing and Services front, was down to 52.7 versus the previous 52.3. The second was recorded at 52.7 against the previous 47. According to the analyst, a negative PMI indicates that the Fed will not go completely hawkish as economic activity is not positive.
Apart from the Fed’s rate decision, the focus of investors will be the US Durable Goods Orders, which will be announced on Wednesday. Economic data is seen at -0.2%. This is significantly lower than the previous version, 0.8%.
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