The past week brought fluctuations to the gold market, with the precious metal experiencing both gains and losses. Here’s a comprehensive recap of the recent developments and an outlook for the upcoming week:
Previous Week’s Highlights:
Monday: After rebounding on Friday, gold kicked off the week on a bullish note, climbing above $1,970. However, surging US Treasury bond yields led to a reversal later in the week, causing gold to close the week in the red.
Tuesday: Economic data from China revealed a contraction in the manufacturing sector, causing gold to lose traction during Asian trading hours. The US Dollar also weakened as the ISM Manufacturing PMI came in slightly worse than expected.
Mid-Week Turbulence: Fitch downgraded the US government’s credit rating, sparking a flight to safety and a decline in global equity indexes. Gold suffered a sharp drop, losing more than 1% on Tuesday and extending the slide into the latter part of the week.
US Data Impact: Positive US private sector employment data led to a climb in the benchmark 10-year US Treasury bond yield, which weighed on gold prices. The World Gold Council’s outlook for 2023 highlighted expected shifts in demand and the potential impact of inflation on fabrication demand.
Thursday: Mixed US data releases led to a consolidation phase for gold prices. The ISM Services PMI declined, while the number of first-time applications for unemployment benefits rose.
Friday: Nonfarm Payrolls (NFP) in the US rose less than expected, causing the US Dollar to come under selling pressure. Gold price recovered, surpassing $1,940 ahead of the weekend.
Upcoming Week’s Outlook:
Chinese Trade Balance: Market participants will closely watch Chinese Trade Balance data on Tuesday, amid concerns about gold demand as signs of an economic slowdown in China emerge.
US CPI Data: The US Bureau of Labor Statistics will release Consumer Price Index (CPI) data for July on Thursday. The Core CPI, excluding volatile food and energy prices, is forecast to rise. A significant increase could impact the USD and gold prices.
Fed Speak and Treasury Yields: Fed policymakers’ comments after the inflation data will influence XAU/USD’s movements. Additionally, action in US Treasury bond yields will offer clues about market perception of dovish or hawkish sentiments. The inverse correlation between the benchmark 10-year US yield and gold price will continue to play a role.
As the gold market remains influenced by a complex interplay of economic data, central bank actions, and global sentiment, investors and traders are poised to closely monitor key indicators and events in the week ahead. The balance between inflation, monetary policy, and market risk will shape the direction of gold prices in the coming days.
