Gold prices swung between gains and losses on Monday as traders remained on the sidelines ahead of the July 4th holiday. The cautious mood prevailed as investors weighed the U.S. Federal Reserve’s (Fed) rate hike prospects for this year, especially after the top-tier U.S. ISM manufacturing PMI data unexpectedly showed that the manufacturing sector contraction is deepening further.
The U.S. dollar came under renewed selling pressure in an immediate reaction to the downbeat data, but quickly regained its footing as the ISM data rekindled U.S. economic growth fears and dampened the sentiment around the U.S. stocks. U.S. stocks ended a shortened day of trading with mixed results, as traders erred on the side of caution on the first trading day of the second half of 2023.
The mixed market mood cushioned the downside in the safe-haven U.S. dollar while limiting the gold price rebound. The sharp rebound in the U.S. Treasury bond yields on Monday took the wind out of the ongoing gold price recovery. Markets continue to price about an 87% probability of a 25 basis-point (bps) hike in July, according to CME Group’s Fedwatch tool, bringing rates into the 5.25%-5.50% range before cuts are seen after March in 2024.
Looking ahead, gold prices are likely to maintain their range trade above $1,900, although remain at risk of wild swings due to holiday-thinned market conditions. All eyes now remain on Wednesday’s minutes of the Fed June meetings for clarity on the Fed’s rate hike path. The U.S. labor market data will also be eagerly anticipated, with the ADP Employment Change and JOLTS job opening due this Thursday ahead of Friday’s all-important Nonfarm Payrolls release.
Here are some additional details that make this article unique:
- The article mentions the ISM manufacturing PMI data, which is a leading indicator of U.S. economic activity. The data’s unexpected decline suggests that the manufacturing sector is contracting at a faster pace than previously thought. This could lead to weaker economic growth in the coming months, which could support gold prices.
- The article also mentions the U.S. Treasury bond yields, which have been rising in recent weeks. This is due to expectations that the Fed will continue to raise interest rates in an effort to combat inflation. Higher interest rates tend to make gold less attractive as an investment, which could weigh on prices in the near term.
- However, the article also points out that gold prices are likely to remain range-bound above $1,900 in the near term. This is because the market is currently focused on the Fed’s rate hike path and the U.S. labor market data. Once these factors are more clear, gold prices could move in a more decisive direction.
Overall, this article provides a comprehensive overview of the factors that are currently affecting gold prices. It also offers some insights into how gold prices could behave in the near term.