Early Monday saw gold prices nursing losses following a significant sell-off of more than 1% on Friday. Traders in the gold market are now eagerly awaiting speeches from US Federal Reserve (Fed) policymakers scheduled for later in the day, seeking fresh insights into monetary policy direction and potential impacts on the US Dollar (USD).
The decline in gold prices last week was exacerbated by persistent strength in the US Dollar and a notable surge in palladium prices. The USD continued its recovery alongside US Treasury bond yields after the S&P Global preliminary US business activity index reached a 26-month high. The Composite PMI Output Index, encompassing both manufacturing and services sectors, rose to 54.6 this month, its highest level since April 2022, up from May’s final reading of 54.5.
Market expectations for a 25 basis points Fed rate cut in September remained steady around 60%, little changed from late Thursday, according to the CME FedWatch Tool. Reaffirmed signs of US economic resilience bolstered the USD, diminishing the attractiveness of gold as an alternative investment within the precious metals category.
Further impacting gold prices, significant inflows into palladium-focused exchange-traded funds (ETFs) drove up the white metal’s value, diverting attention away from gold.
As the new week begins, cautious sentiment prevails ahead of the US Personal Consumption Expenditures (PCE) inflation data release, with investors also monitoring developments surrounding the Fed’s future interest rate decisions and the outcome of the French elections. End-of-month flows and broader market risk trends are expected to influence gold price movements leading up to Friday’s key US inflation data.
In conclusion, the direction of gold prices hinges on forthcoming Fed communications and economic data releases, with potential for further downside if Fed policymakers signal a hawkish stance contrary to expectations of a September rate cut. The interplay of geopolitical events and market sentiment will continue to shape gold’s trajectory in the coming sessions.
