Gold (XAU/USD) continued to trade within a familiar range just above $2,500 on Monday, even as Asian stock markets declined due to concerns over China’s economic growth. The mixed Manufacturing Purchasing Managers Index (PMI) data added to these fears, with China’s official NBS Manufacturing PMI falling further into contraction territory, while the Caixin Manufacturing PMI unexpectedly rose into expansion.
US Dollar Recovery Pressures Gold Prices The price of gold is facing pressure from the recovering US Dollar (USD), which rebounded after hitting year-to-date lows last Tuesday when the US Dollar Index (DXY) dropped to 100.52. Following the release of July’s US Personal Consumption Expenditures (PCE) data on Friday, which showed inflation holding steady from the previous month, the DXY climbed back to the 101.60s. This data reinforced market sentiment that the US economy might be on track for a “soft” landing rather than a “hard” one.
The outlook for US interest rates, a critical factor for gold prices, remains unchanged. According to the CME FedWatch Tool, there is a slightly above 30% probability of a 50 basis point (bps) rate cut in September, with a 25 bps cut fully anticipated.
Thin Trading Expected Due to Labor Day Trading volumes are expected to be light on Monday, as both the US and Canada observe Labor Day. However, key employment data, culminating in Friday’s Nonfarm Payrolls (NFP) report, will be crucial in determining whether the Federal Reserve (Fed) will opt for a significant half-percent rate cut or a more conventional quarter-percent reduction.
