Gold prices continued their downward trajectory for the third consecutive day on Thursday, hitting one-week lows. This decline followed the release of upbeat economic data from the United States, which spurred an increase in US Treasury yields and bolstered the American Dollar. The surge in yields and the strengthening Dollar dampened hopes for potential rate cuts by the Federal Reserve (Fed), with investors now anticipating just a 27 basis points easing by the end of 2024, as per data from the Chicago Board of Trade (CBOT).
At the time of reporting, the XAU/USD pair is trading at $2,332, marking a significant drop of 1.90% after reaching a high of $2,383.
The momentum of US business activity appears to be gaining traction, as indicated by S&P Global’s May final reading of the Manufacturing, Services, and Composite Purchasing Managers’ Index (PMIs). Additionally, data from the US Bureau of Labor Statistics (BLS) showed that the number of Americans filing for unemployment benefits fell short of estimates and was lower than the previous reading, signaling strength in the labor market.
The positive economic data bolstered the US Dollar, which recorded a 0.18% gain according to the US Dollar Index (DXY), pushing it back above the 105.00 mark. Furthermore, the release of Fed Minutes on Wednesday revealed that some officials were prepared to raise rates if inflation warranted, posing a challenge for the non-yielding metal.
Meanwhile, gold prices found support from central bank buying in emerging markets, as reported by The Wall Street Journal. The catalyst for this buying spree was the imposition of Western sanctions on Russia following its invasion of Ukraine.
According to the World Gold Council, central banks have accumulated approximately 2,200 tons of gold since the third quarter of 2022.
