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03/09/24
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Gold Prices Dip for Third Day Amid Dollar Recovery and Fed Rate Speculations
Gold prices experienced a decline for the third consecutive day on Tuesday, remaining below the critical $2,500 level. The pressure on gold is attributed to a recovering US Dollar, heightened by a cautious market sentiment influenced by China and rising Treasury bond yields. The upcoming U.S. ISM Manufacturing PMI report is eagerly anticipated as traders look for signals to steer their positions.
Gold’s recent drop follows diminishing expectations of a significant interest rate cut by the Federal Reserve this month, particularly after the latest data release, which showed the core Personal Consumption Expenditures (PCE) Price Index rose 2.6% year-over-year and 0.2% month-over-month. This data was largely in alignment with market forecasts and has led to a reevaluation of the likelihood of a major rate cut at the Fed’s upcoming policy meeting.
As traders adjust their bets for the Fed’s September meeting, the market currently anticipates only a 31% chance of a 50 basis points cut, while a 25 basis points adjustment is seen as more probable at 69%. This shift in expectations has allowed the US Dollar to firm up, trading near highs against its peers, which has negatively impacted gold prices. Additionally, stabilizing Treasury yields have added to the downward pressure on gold.
Looking ahead, traders are particularly focused on the employment data to be released on Friday, as it will provide further insight into the Fed’s forthcoming decisions. In the interim, traders will analyze the US ISM Manufacturing PMI data anticipated for release, with projections indicating a potential improvement to 47.5 in August from July’s reading of 46.8.
From a technical analysis perspective, gold buyers remain optimistic as long as prices stay above the 21-day Simple Moving Average (SMA) at $2,480. The Relative Strength Index (RSI) indicates some downward momentum, suggesting caution but also hinting at a possible buying opportunity within bullish territory. If gold can maintain support at $2,480, it may pave the way for a recovery toward the $2,500 mark and potentially retest August’s record high of $2,532. Conversely, a decline below this support level could lead prices down to the $2,464 area, which is crucial for sustaining the recent upward trend.
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