The price of gold (XAU/USD) found support after slipping below the critical level of $2,300 during Tuesday’s early American session, as the yellow metal rebounded following the release of weak S&P Global United States preliminary Purchasing Managers’ Index (PMI) data for April. This decline in the US Dollar Index (DXY), which tracks the value of the US Dollar against a basket of major currencies, was triggered by disappointing PMI figures.
The Manufacturing PMI unexpectedly dropped to 49.9 from an anticipated 52.0, signaling a contraction in the sector. Similarly, the Services PMI, which represents two-thirds of the economy, declined to 50.9 from an expected 52.0. Such sharp declines in PMI figures suggest weak consumer spending and inventory destocking.
Despite concerns over the outlook for gold, investors appeared to shrug off geopolitical tensions in the Middle East, as hopes of a de-escalation in the conflict between Iran and Israel boosted risk appetite and reduced safe-haven demand.
However, 10-year US Treasury yields climbed to 4.64%, shifting investor focus to the release of the US core Personal Consumption Expenditure Price Index (PCE) data for March scheduled for Friday. This inflation data will offer insights into the Federal Reserve’s guidance on interest rates in the upcoming May policy meeting, with expectations leaning towards maintaining rates within the range of 5.25%-5.50%. The Fed‘s preference for higher interest rates supports US bond yields but weighs on gold prices.
