Gold Updates 3-Day Highs as Dollar Loses Appeal Awaiting Jackson Hole Symposium

  • Gold price finds offers as the attractiveness of the US dollar moderates.
  • The rigidity of the US labor market could be a limiting factor in achieving price stability.
  • The Fed’s Powell speech in Jackson Hole is this week’s key event.

The price of Gold (XAU/USD) It bounces on Tuesday after hitting a fresh 5-month low below $1,890.00, taking advantage of a mild correction in the US dollar. The precious metal is rallying as investors seem confident that the Federal Reserve (Fed) is not planning to raise interest rates further, although they also admit that rate cuts are unlikely to be discussed this year.

The US economy continues to hold up as the country’s job market is very tight. Fed Chairman Jerome Powell is likely to offer guidance on interest rates and the economic outlook in his speech at the Jackson Hole Economic Symposium. It will be worth watching if Jerome Powell mentions the possibility of a recession due to tight monetary policy. As for economic data, durable goods orders for July will be released this week.

Daily Summary of Market Movements: Gold Price Extends Recovery as US Dollar Corrects

  • Gold price extends its rally to approach the crucial resistance of $1,900, while the US Dollar Index (DXY) corrects after failing to break above the $103.50 barrier.
  • The precious metal strengthens as investors remain confident that the Fed will keep interest rates unchanged in its September policy.
  • US Treasury yields struggle to extend gains, providing a level playing field ahead of the Jackson Hole Economic Symposium.
  • Investors will be closely watching Fed Chairman Jerome Powell’s comments in Jackson Hole. Powell is likely to offer a road map on how to shred the “last mile” of inflation and achieve price stability.
  • Market participants hope that Jerome Powell’s comment is not accompanied by a warning of further interest rate hikes. However, a strong message suggesting the possibility of higher interest rates over a longer period cannot be ruled out.
  • Aside from interest rate guidance, Powell’s outlook on the labor market and broader economic activity will receive a lot of attention.
  • Morgan Stanley said that a possible change of opinion on the neutral rate deserves attention, since it would imply a change in the expected path for the policy rate and therefore the yield curve as a whole.
  • Ahead of the Jackson Hole event, investors will focus on S&P global PMI data and new home sales, due for release on Wednesday.
  • According to estimates, the manufacturing PMI will increase 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.
  • Monthly new home sales for July are expected to rise despite rising mortgage rates.
  • US Durable Goods Orders 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%.
  • Market sentiment turns bright despite Moody’s and S&P Global downgrading the credit ratings of US commercial banks, citing risks of increased outflows in a high interest rate environment.
  • The US economy is expected to remain resilient as the labor market is tight and construction spending is rising despite rising interest rates.
  • Fed policymakers say the growth rate could slow for a few quarters amid the price stability pursuit agenda.
  • A July survey by the National Federation of Independent Business (NFIB) shows that small businesses are far less concerned about the health of their bank than they were immediately after this spring’s bank failures, including the one in Silicon Valley. Bank.
  • The NFIB survey also shows that 52% of small business owners say the economy is already in recession. The percentage is lower than the 55% registered in April.

Technical Analysis: Gold price seeks stabilization above $1,900

Gold price breaks out of the two-day consolidation and jumps near the round $1,900 resistance level. The precious metal strengthens as the US dollar fails to extend its recovery, providing a level playing field heading into the Jackson Hole Symposium. The yellow metal is bouncing after hitting a fresh 5-month low around $1,885.00, but continues to trade below the 200 day EMA, indicating that the longer-term trend is down.

Source: Fx Street

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