Gold remains sideways awaiting PMI data

• Gold price is set to extend the gains ahead of the US PMI data.
• The Fed’s Barkin expects the US recession to be “less severe.”
• The strength of gold prices is due to the restrictive rise in US Treasury yields.

The price of Gold (XAU/USD) strengthens this week as the rally in US Treasury yields stalls amid fading hopes of more Federal Reserve (Fed) rate hikes. The US headline Consumer Price Index (CPI) is down to 3.2% from its 9.1% peak due to an aggressive rate tightening cycle, but the Fed will likely have to hold interest rates higher for longer, as the remaining excess inflation above the desired 2% rate seems extremely stubborn.

Speaking at the Jackson Hole symposium, Fed Chairman Jerome Powell is expected to explain the advantages of keeping rates higher for longer and is also likely to avoid supporting further policy tightening in the absence of encouraging economic data. Ahead of the Jackson Hole event, investors will be watching preliminary S&P Global PMI data, due at 13:45 GMT.

Daily summary of the movements in the markets: The price of Gold remains sideways while the Dollar moves higher

• Gold price is consolidating marginally above $1,900, supported by weak US Treasury Yields ahead of the Jackson Hole Economic Symposium.
• Yields on the 10-year US Treasury slipped below 4.30% as Fed Chairman Jerome Powell is not expected to explicitly refer to further policy tightening in the event of Jackson Hole.
• Richmond Fed President Thomas Barkin said the recent movements in bond yields are not a sign of inappropriate market tightening, but rather a response to strong economic data.
• On interest rate guidance, Thomas Barkin said if inflation remains high and there are no signs of falling demand. The situation will force a tightening of monetary policy.
• Fed Barkin also added that the recessionary situation in the US economy will be “less severe.”
• Investors are hoping Powell will suggest that interest rates are likely to stay higher for longer so that inflation can return to 2%.
• Aside from interest rate guidance, investors will also focus on the labor market and the inflation outlook.
• Market participants expect that Fed policymakers will have to spend more blood and sweat to chip away at the “last mile” of inflation, which is the remaining path to the desired 2% rate. Therefore, the Fed is expected to keep interest rates higher for longer.
• On Wednesday, investors will focus on the preliminary S&P Global PMI data for August, due at 13:45 GMT.
• According to estimates, the Manufacturing PMI is expected to rise to 49.3 in August from 49.0 in July. As for the services PMI, a slight decline is expected to 52.2 from 52.3 the previous month.
• Following the S&P Global Flash PMI, investors will turn their attention to July Durable Goods Orders, which will be released on Thursday at 12:30 GMT. A contraction in orders of 4.0% is expected. In June, durable goods orders grew 4.6%.
• The US Dollar Index (DXY) makes a solid break above the crucial resistance at 103.70 as investors continue to inject liquidity due to strong resistance in the US economy.
• Meanwhile, the US banking regulator, the Federal Deposit and Insurance Corporation (FDIC), will propose new rules on August 29 that review the preparedness of large regional banks in the face of possible bankruptcy. US banking regulators are concerned about potential risks from rising borrowing costs.
• US National Security Adviser Jake Sullivan said Tuesday that US Commerce Secretary Gina Raimondo will travel to China next week with the message that the US is not seeking to disassociate itself from China, Reuters reported.

Technical Analysis: Gold price aims to stay above $1,900

Gold price is trying to break out of the consolidation formed in a range of $1,885-$1,900 in the last week. The precious metal bounces after touching a fresh five-month low near $1,885.00. However, the overall trend remains bearish due to rising US Treasury yields. Despite a three day rally, the yellow metal is struggling around the 200 day EMA. The dip in the 20 and 50 day EMAs indicates a medium-term downtrend.