Gold prices are currently defending the $2,400 mark, maintaining a corrective stance following a recent peak of $2,425 reached on last Thursday.
The muted performance of gold can be linked to a rebound in the US Dollar (USD) and rising US 10-year Treasury yields, as investors react to the recent assassination attempt on former President Donald Trump during a rally in Pennsylvania, where he was shot in the ear.
This incident has heightened risk aversion in markets, aiding the USD’s modest recovery after last week’s decline. While Trump’s chances of political victory may have increased, the event has also introduced new uncertainties, contributing to a rise in Treasury yields, which negatively impacts government bond prices.
Despite the USD’s strength and elevated yields, gold’s decline appears limited, particularly in light of sluggish economic growth in China and increasing expectations for a Federal Reserve interest rate cut in September.
Recent data from China’s National Bureau of Statistics indicated that the economy grew 4.7% year-on-year in the second quarter, down from 5.3% in the previous quarter and marking the slowest growth since Q3 2023. This figure fell short of the market’s forecast of 5.1%, fueling speculation that China may implement stimulus measures to boost its economy.
Market analysts are now predicting over a 90% likelihood that the Fed will reduce rates in September, particularly following last Thursday’s Consumer Price Index (CPI) report, which showed a 3.0% year-on-year increase for June, down from 3.3% in May and below the expected 3.1%.
Gold traders will be closely monitoring Fed Chairman Jerome Powell’s speech at the Economic Club of Washington later today for insights on monetary policy and their potential effects on gold prices. Additionally, ongoing US political developments are expected to significantly influence both the USD and gold valuations.
