Gold prices are showing stability around the $2,020 mark early this Wednesday, rebounding from a two-day correction after reaching record highs of $2,144 on Monday.
The current strength in gold prices is attributed to a broad retreat of the US Dollar, as investors take a pause following this week’s upward movement, anticipating the influential US ADP Employment Change data release.
Despite a market environment marked by risk aversion, the US Dollar is grappling with challenges, particularly as traders assess new concerns regarding the Chinese economy. Moody’s Investors Service’s decision to downgrade China’s government credit ratings from stable to negative dissuades investors from opting for riskier assets, providing support to the traditional safe-haven appeal of gold.
However, the upward momentum in gold prices may face limitations due to a modest increase in US Treasury bond yields, with markets currently indicating a 60% probability of a US Federal Reserve interest rate cut in March.
The impact of a mixed set of US economic data released on Tuesday has not significantly altered market expectations regarding the Federal Reserve’s interest rate outlook. The Institute for Supply Management’s (ISM) Services PMI for November showed a firming trend at 52.7, up from October’s reading of 51.8. Conversely, US JOLTS Job Openings declined to a 2-1/2-year low of 8.733 million in October, signaling further loosening of labor market conditions.
Investor focus now turns to the eagerly awaited US ADP Employment Change data scheduled for release in American trading on Wednesday, providing crucial insights into the US labor market ahead of Friday’s pivotal Nonfarm Payrolls release.
Gold prices will also be influenced by the prevailing risk sentiment and its impact on the US Dollar and US Treasury bond yields, as investors continue to navigate economic uncertainties.
