Gold Price Attempts to Recover After Recent Losses Following Moderate US Data

As the Pullback in US Treasury Yields Puts Pressure on the US Dollar

Gold prices have managed to snap a four-day losing streak, showing resilience and trading higher at approximately $1,872 per troy ounce during the Asian trading session on Friday. This remarkable turnaround comes after the precious metal experienced its lowest levels since March, and it is primarily attributed to a correction in the US Dollar (USD). The USD weakened in response to moderate economic data emerging from the United States (US).

One significant factor contributing to this shift is the pullback in US Treasury yields. As these yields retreated, they exerted downward pressure on the US Dollar. Investors often seek refuge in non-yielding assets like Gold when the yield on government bonds becomes less attractive. However, it’s worth noting that the yield on the 10-year US Treasury bond has retraced some of its recent losses, currently standing at 4.59% at the time of writing.

In terms of economic indicators, the US GDP remained consistent at 2.1%, in line with expectations. Initial Jobless Claims for the week ending on September 22 also printed a lower reading of 204K compared to the market consensus of 215K, which had been 202K in the prior week. These figures suggest relative stability in the US job market, which can influence the Federal Reserve’s monetary policy decisions.

On the flip side, US Pending Home Sales showed a surprising decline of 7.1%, surpassing the market expectation of a 0.8% fall and reversing the 0.9% rise seen previously. This could signal some concerns in the US housing market, which has been a bright spot in the economy.

The US Dollar Index (DXY) has extended its losses for a second consecutive day following the release of these moderate datasets from the United States (US), and it is currently trading around the 106.00 mark.

The USD had experienced a strong rally over the past week, bolstered by robust economic indicators, and it reached its highest levels since December. Furthermore, the USD’s resilience can be partly attributed to the favorable performance of US Treasury yields, which had been rising before their recent pullback.

Chicago Fed President Austan Goolsbee expressed confidence that the Fed will succeed in bringing inflation back to its target. Goolsbee also highlighted the unique opportunity to achieve this without triggering a recession, underscoring the US Federal Reserve’s (Fed) commitment to managing inflation while supporting economic growth.

Federal Reserve Bank of Richmond President Thomas Barkin acknowledged that recent inflation data has been positive. However, he cautioned that it’s still too early to determine the future course of monetary policy, implying that the Fed remains cautious and data-dependent.

Investors are now eagerly awaiting the release of the US Core Personal Consumption Expenditure (PCE) Price Index, the Fed’s preferred measure of consumer inflation, scheduled for Friday. The consensus among analysts is that the annual rate is expected to reduce from 4.2% to 3.9%. This release will likely play a pivotal role in shaping market sentiment and influencing the direction of Gold prices and the US Dollar in the near term.

In conclusion, Gold’s recovery from recent losses reflects a complex interplay of economic data, Treasury yields, and currency market dynamics. As investors await the PCE Price Index, the precious metal remains in a state of flux, subject to the ever-changing landscape of economic indicators and central bank policies.