Gold tackle Dollar rebound, awaiting FED rate-cut clarity

作者：Priyanka Sachdeva，Phillip Nova 高级市场分析师

Gold Snapshot
1. The stronger US Dollar undermines Gold prices as hopes of a larger FED cut subsided.
2. The concerns about the sluggish economy in China, contribute to the precious metal’s downside.
3. The US Core PCE inflation remains unchanged at 2.6, supporting the notion of a smaller September Fed cut than originally anticipated by markets.

Gold prices seemed to recover from losses booked in EARLY Asian morning trades, which were weighed on by the brewing strength of the US Dollar. The souring sentiments from mainland China, the world’s largest consumer of bullion also undermined Gold prices.

Gold has been losing ground and consolidating at around 2500 throughout the last two weeks after registering a recent lifetime high on 20 August. The US Core PCE inflation, FED’s preferred indicator of inflation remained unchanged at 2.6 while consumer spending showed robust signs, stripping hopes of a larger FED cut in September. The rebound in the dollar that followed weighed on the dollar-denominated non-yielding asset, Gold. As of 12:20pm Singapore Standard Time, Gold COMEX December futures traded at $2528.65, marginally up from the previous close.

Markets seem to bet 70% in favor of a 25 basis points cut in September as against 30% bets of a 50 basis points cut now in the CME Fedwatch tool. Gold has surged over 22% this year, with over 8% of the rise stemming from July. One of the main drivers of the gold price over the past two months has been the dollar’s near 5% weakness against a basket of major currencies. Gold traders are bracing for the FED cut, which just might be the trigger required for Gold to continue in bullish territory as we head into the month of September.

Ahead this week, Gold traders are awaiting more clarity from upcoming US nonfarm payrolls and jobless claims data. Further upside in gold would likely require a more aggressive rate cut or a surprising 0.50 basis point cut in the September meeting. While Gold may continue to enjoy a bullish medium-term and long-term outlook, the short-term price movement is highly vulnerable to FED’s pace of rate cuts. Investors should also closely watch the developments in Gaza and any signs of escalation could benefit the safe-haven demand and in turn Gold Prices.

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