Gold price hovers near $2,650 in Monday’s Asian session, maintaining its corrective dip despite renewed Chinese stimulus measures and escalating geopolitical tensions in the Middle East. Investors remain cautious ahead of US Federal Reserve (Fed) Chair Jerome Powell’s speech later today, which could provide crucial clues about the Fed’s monetary policy direction.
Powell’s Speech in Focus for Market Direction
Following a speech last Thursday that offered no new insights into the Fed’s economic or policy outlook, traders are now eager for fresh guidance from Powell. His remarks today could shed light on the likelihood of a significant interest rate cut at the Fed’s November meeting. According to the CME Group’s FedWatch Tool, markets currently price in a 52% chance of a 50 basis points (bps) rate cut, up slightly from 50% last week.
The anticipation of rate cuts is supported by Friday’s core Personal Consumption Expenditures (PCE) Price Index, the Fed’s favored inflation gauge. The PCE data showed inflation pressures are easing, with the headline rate rising just 0.1% in August, bringing the annual rate to 2.2%. The core PCE rose 2.7% year-over-year, in line with expectations, while monthly core inflation dipped to 0.1%, down from 0.2% in July. This softening inflation has pulled the Fed closer to its 2% target, applying downward pressure on the US Dollar (USD).
Gold Price Faces Pressure Amid Dollar Weakness and Profit-Taking
Despite the weaker USD, Gold prices retreated from last week’s record high of $2,686 as investors booked profits ahead of a busy week, which includes the release of key US Nonfarm Payrolls data. Month-end and quarter-end portfolio adjustments also weighed on the metal, contributing to the recent decline.
In Monday’s session, Gold continues to trade in negative territory, shrugging off the boost from China’s latest stimulus measures and the escalating Middle East conflict. Over the weekend, Israel intensified airstrikes on Lebanon, killing another senior Hezbollah figure following the assassination of leader Hassan Nasrallah. Iran, which supports Hezbollah, has vowed retaliation, further raising geopolitical risks that could typically bolster safe-haven demand for Gold.
Chinese Stimulus and Disappointing PMI Data
Meanwhile, China introduced additional stimulus measures, with the People’s Bank of China (PBoC) instructing banks to reduce interest rates on existing home loans by as much as 50 bps by the end of October. However, the boost from these measures was partially offset by disappointing economic data. China’s official Manufacturing Purchasing Managers’ Index (PMI) came in at 49.8 for September, slightly above forecasts of 49.5 but still indicating contraction. The Caixin Manufacturing PMI also fell back into contraction territory at 49.3, down from 50.4 in August, dampening optimism surrounding the latest Chinese stimulus actions.
As traders navigate these mixed signals from China, the Fed, and global tensions, Gold prices remain under pressure, awaiting a clearer market direction from Powell’s upcoming speech.
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