The price of gold (XAU/USD) has broken its three-day losing streak, showing resilience in the early Asian session on Wednesday. Despite a stronger US Dollar (USD), gold is trading around $2,060, reflecting a 0.13% increase for the day.
In contrast, the US Dollar Index (DXY), which measures the USD against a basket of currencies, is trading positively for the fourth consecutive day. The DXY rebounded from 100.60 and is hovering around 102.20. Meanwhile, Treasury yields have slightly decreased, with the 10-year yield at 3.94%.
The potential for rate cuts from the Federal Reserve (Fed) could limit the upside of the US Dollar and provide support to USD-denominated commodities like gold. Market expectations, as per the CME FedWatch tool, indicate no rate hike for the January meeting, with projected rate cuts in March and May 2024.
Recent economic data from the US, including the final Manufacturing PMI for December, came in below expectations. The manufacturing PMI registered 47.9, lower than the previous reading of 48.2. Additionally, the Chicago Purchasing Managers’ Index (PMI) for December was 46.9, missing the market expectation of 51.0.
There are positive developments in China’s economy, as seen in the average daily home sales during the New Year holiday, which dropped by 26% compared to the same period last year. Chinese authorities have expressed their commitment to resolving real estate risks and supporting stable market growth, potentially influencing the gold market, given China’s significant role as a consumer of gold.
Looking ahead, market participants will closely monitor the final US ISM Manufacturing PMI report and the Fed’s Meeting Minutes scheduled for Wednesday. The focus will then shift to the US labor data on Friday, with the Nonfarm Payrolls (NFP) figure expected to show an increase of 168K in December. Traders will also analyze the Unemployment Rate and Average Hourly Earnings for potential trading opportunities in the gold market.
