Last week, gold price experienced a rollercoaster ride as it made a U-turn in the second half of the week, dropping toward $1,950 after rising above $1,980. The market sentiment was influenced by upbeat data releases from the US, which pushed back against expectations for no change in Federal Reserve policy rates for the rest of the year. The US dollar lost its appeal, allowing gold to recover some of its weekly losses on Friday.
At the start of the week, market participants remained cautious ahead of the Fed‘s policy announcements, resulting in modest bearish pressure on gold. However, as S&P Global PMI surveys revealed the US economy’s relative strength compared to the Eurozone and the UK in June, the USD saw capital inflows, weighing on gold.
The Federal Reserve raised its policy rate by 25 basis points, as expected, but Chairman Jerome Powell’s post-meeting comments indicated uncertainty about another rate hike later in the year. This led to a decline in US Treasury bond yields and a subsequent rise in gold price above $1,980.
On Thursday, strong US data releases caused the USD to stage a comeback, pushing the 10-year US Treasury bond yield above 4%. Gold price fell below $1,950, erasing its post-Fed gains.
Inflation data from the US showed a decrease in the Personal Consumption Expenditures (PCE) Price Index, causing US T-bond yields to retreat and helping gold to recover some of its weekly losses on Friday.
Next week, the NBS Manufacturing PMI and Non-Manufacturing PMI data from China, the world’s largest consumer of gold, could impact XAU/USD in the early Asian session on Monday.
The US economic docket on Tuesday will feature the ISM Manufacturing PMI and JOLTS Job Openings data. A reading below 50 in the ISM Manufacturing PMI could indicate ongoing contraction in the manufacturing sector, potentially affecting gold price.
Wednesday and Thursday will see the release of the ADP private sector employment report and the ISM Services PMI, respectively. The highlight of the week will be the US Bureau of Labor Statistics’ July jobs report on Friday, with Nonfarm Payrolls (NFP) forecasted to rise by 184,000. A reading close to 200,000 could support the case for additional tightening in Fed policy, while NFP below 150,000 may lead to dovish Fed bets and push gold price higher.
To sum up, XAU/USD faces mixed prospects in the short term. Strong US data and labor market conditions could lead to bearish pressure on gold, while a decline in US data could revive expectations for no further rate hikes and trigger a rally in gold price.
