Gold Extends Gains to $1,920 Amid Focus on US Economic Data

Gold prices continue to climb, approaching the $1,920 per troy ounce mark during the early European trading session on Friday. This upward momentum can be attributed, in part, to a modest correction in the US dollar (USD). Additionally, positive data from China, reported by the National Bureau of Statistics (NBS), has contributed to market optimism and supported gold prices. The recent move by the People’s Bank of China (PBoC) to lower the Reserve Requirement Ratio (RRR) by 25 basis points (bps) has also had an impact.

China’s Retail Sales (YoY) for August showed a robust growth of 4.6%, exceeding expectations of a 3.0% increase. This figure marks an improvement compared to the previous month’s 2.5%. Furthermore, Industrial Production in China surpassed estimates with a growth rate of 4.5% in August, up from a 3.7% rise in July.

The US Dollar Index (DXY) has retreated from its recent six-month high and is currently trading around 105.20. However, the potential for a significant correction in the Greenback appears limited, mainly due to market caution in response to the US Federal Reserve’s (Fed) hawkish monetary policy stance.

US Treasury yields have also recovered from intraday losses, with the yield on the 10-year US bond at 4.30% at the time of writing. These improved yields could lend support to the USD.

Market participants are closely monitoring the Fed’s commitment to a more stringent monetary policy, which may involve additional interest rate hikes or tightening measures. This anticipation is expected to deter traders from taking bold positions in non-yield assets like gold. The focus remains on monetary policy decisions and the Fed’s communications in the near term.

Moreover, recent economic data from the United States has generally been positive. Initial Jobless Claims for the week ending September 8 came in better than anticipated, with 220,000 new claimants, a slight improvement from the previous week’s figure of 217,000. The Core Producer Price Index (PPI) for August matched expectations with a 2.2% increase, although it was slightly lower than the previous rate of a 2.4% hike. Retail Sales also showed improvement, rising to 0.6% compared to the previous month’s 0.5%, surpassing market expectations of a slowdown to 0.2%.

Collectively, these data figures suggest a relatively healthy economic environment in the US, which can impact market sentiment and influence trading decisions.

During the North American session, market participants will closely watch the release of the US preliminary Michigan Consumer Sentiment Index. The consensus expectation is for a minor decline from the previous reading of 69.5 to 69.1. This data point could further shape market sentiment and trading trends.