The rally of the US Dollar Index in the first session of the week put pressure on the precious metal priced in USD. Earlier this morning, the US Dollar Index rose 0.31% to 101.38 points, taking away the attractiveness of gold for buyers holding foreign currencies.
New economic data is also negative for gold. Specifically, the Purchasing Managers' Index in the manufacturing sector remained in contractionary territory but rose more than expected to 49.3 after reaching 46 in June. Economists forecast steady activity with a rise of 46.1.
The report also said activity in the manufacturing sector rose to a three-month high. Meanwhile, activity in the service sector fell to a five-month low.
New economic data is also negative for gold. Specifically, the Purchasing Managers' Index in the manufacturing sector remained in contractionary territory but rose more than expected to 49.3 after reaching 46 in June. Economists forecast steady activity with a rise of 46.1.
The report also said activity in the manufacturing sector rose to a three-month high. Meanwhile, activity in the service sector fell to a five-month low.
Comment:
Economic data provides no impetus for the gold market; however, gold is holding the support at $1,950 an ounce. Chris Williamson, chief economist at S&P Global Market Intelligence, said July got off to a disappointing start and the data could continue to highlight recession threats.
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Gold prices traded in a tight range on Monday (July 24) as investors awaited a rate hike as expected by the market along with clues on future monetary policy from the US Federal Reserve (Fed) this week.
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However, the focus of the market is still on the interest rate decision of the US Central Bank on Wednesday (July 26), followed by the European Central Bank (ECB) policy meeting on Thursday (July 27). Both are expected to raise interest rates.
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Gold is very sensitive to interest rate hikes because it increases the opportunity cost of owning a non-yielding asset like gold.
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“Any unexpected dovish signal, especially from the Fed, could positively support gold, with fresh opportunities to move towards the $2,000 mark,” Carlo Alberto De Casa, market analyst at Kinesis Money, said in a note.
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At the time of the survey, the USD Index, a measure of the greenback's strength against its peers in a basket of currencies, was up 0.3% to 101.105.
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Meanwhile, the price of gold bought in euros hit its highest since July 5 at the beginning of the session on July 25 after data showed that business activity in the euro area (Eurozone) fell more than expected in July, according to Reuters.
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In other precious metals markets, silver fell 0.7% to $24.39 an ounce, platinum fell 0.1% to $961.01 and palladium fell 1% to $1,277.84.
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In a note, UBS experts forecast that platinum could experience a shortage of supply in the remaining months of 2023 because of its alternative use in automotive emission-reduction catalytic converters and low supply from South Africa.
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The precious metal experts said that the direction of gold in the near future largely depends on the statement of Fed Chairman Jerome Powell at the press conference.
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According to Moya, if the Fed continues to make the option of tightening further and the upcoming economic data is positive, it will likely cause gold to fall deeply.
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Chris Williamson, chief economist at S&P Global Market Intelligence, said that although inflation has fallen sharply from last year's 40-year high, it is likely to remain above 3% for the foreseeable future.
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In the foreign exchange market, the US Dollar Index (DXY) opened this morning at 101.42 points.
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The US received positive economic information. The Manufacturing Purchasing Managers' Index (PMI) increased from 46.3 points in June to 49 points in July, and higher than the forecast of only 46.1 points.
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PMI of manufacturing sector and service sector in Eurozone were respectively at 42.7 and 51.1 points in July, lower than June's 43.4 and 52 points, and lower than 43.5 and 51.7 points according to forecast.
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In a recent interview with Kitco News, Steven Land, Portfolio Manager of Franklin Templeton's Franklin Gold and Precious Metals Fund, said gold's lackluster position shows its potential in the market.
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Edward Moya, senior market analyst at OANDA, said that the gold market is reacting due to the recovery of the USD. The Bank of Japan (BOJ) signaled that it would maintain its loose monetary policy.
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Currently, there are three reasons given when countries look for another currency. First, US monetary policy influences the rest of the world too much. Second, the dollar is becoming too expensive for emerging countries, particularly for imports.
Third, the demand for oil is gradually diversifying. A major reason the USD has become the world's reserve currency is that the Gulf states of the Middle East used the greenback to trade oil.
Third, the demand for oil is gradually diversifying. A major reason the USD has become the world's reserve currency is that the Gulf states of the Middle East used the greenback to trade oil.
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According to Kitco, gold prices are under pressure in the short term due to the Fed's interest rate hikes. However, in the long term, precious metals tend to increase thanks to the USD about to reverse its downward trend when the Fed ends the cycle of tightening monetary policy.
Comment:
The gold market remains resilient as it continues to maintain solid support above $1,950 an ounce even as the US Federal Reserve unleashes its strongest tightening cycle in more than 40 years.
The precious metal is well positioned to raise records as the U.S. central bank moves closer to gains, said Steve Land, portfolio manager of Franklin Templeton's Franklin Gold and Precious Metals Fund. Finally interest. As investors' renewed demand, he added, is the key to bringing gold back to record highs above $2,000 an ounce.
Explaining land, slowing economic growth will continue to fuel recession fears in financial markets, which in turn will support investment demand in gold. Comments on the optimism of the Golden Land come as the US Federal Reserve (Fed) begins its two-day monetary policy meeting. The market downturn is certain that the US Central Bank will raise interest rates by 25 basis points after this meeting. At the same time, there are those who expect this could be the last rate hike in the strongest tightening cycle in four this fall.
The precious metal is well positioned to raise records as the U.S. central bank moves closer to gains, said Steve Land, portfolio manager of Franklin Templeton's Franklin Gold and Precious Metals Fund. Finally interest. As investors' renewed demand, he added, is the key to bringing gold back to record highs above $2,000 an ounce.
Explaining land, slowing economic growth will continue to fuel recession fears in financial markets, which in turn will support investment demand in gold. Comments on the optimism of the Golden Land come as the US Federal Reserve (Fed) begins its two-day monetary policy meeting. The market downturn is certain that the US Central Bank will raise interest rates by 25 basis points after this meeting. At the same time, there are those who expect this could be the last rate hike in the strongest tightening cycle in four this fall.
Comment:
After Wednesday's widely anticipated 25 basis point hike, there's about a 60 percent chance the Fed will keep rates unchanged through 2024, according to the CME FedWatch tool.
Comment:
Gold consumption by key buyers grew 16% year-on-year in the first half of 2023, with jewelry consumption up nearly 15%.
Comment:
Gold consumption by key buyers grew 16% year-on-year in the first half of 2023, with jewelry consumption up nearly 15%.
