Highlights:
- Gold trades cautiously, snapping a four-week losing streak.
- Elevated US yields and China’s economic concerns influence the metal’s price.
- Markets await Powell’s insights at the Jackson Hole Symposium, aiming to decipher Fed’s policy direction.
Detailed Analysis:
In Tuesday’s Asian trading session, Gold prices remained slightly higher, hovering around $1,895, possibly ending a four-week decline thanks to a retreating US Dollar (USD). Despite this, Gold sellers remain vigilant in the face of increased risk aversion, elevated US Treasury yields, and challenges stemming from China’s economy, all factors that may offset the effects of USD’s decline on Gold.
Investors are keenly monitoring the Federal Reserve’s (Fed) September meeting, where a 25 basis points (bps) interest rate hike is anticipated. This expected move could exert downward pressure on the yellow metal, particularly if US economic data supports a more hawkish sentiment among USD buyers.
The US Dollar Index (DXY), trading lower around 103.20, reflects caution in the markets despite strong US data and high bond yields. Market participants are eagerly awaiting signals on the inflation scenario and possible adjustments to the Fed’s monetary policy.
China’s economic troubles may also significantly affect investor sentiment. A disappointing cut of 10 bps in the Loan Prime Rate (LPR) by the People’s Bank of China (PBoC) has led to speculation that China may prioritize supporting existing borrowers rather than stimulating credit growth.
Key Events Ahead:
The upcoming speech by Fed Chair Jerome Powell during the Jackson Hole Symposium on Friday is seen as a central event that could shape potential investment strategies in non-yielding Gold. Further details on the US economy and the Fed’s policy approach may emerge from Powell’s address. The release of Existing Home Sales Change (MoM) for July later in the North American session is also in focus.
Technical Outlook:
Gold is struggling to break past the $1,900 mark, with a weaker risk tone lending support, limiting the losses for XAU/USD. Hawkish expectations regarding the Fed continue to underpin the USD, acting as a headwind for the Gold price.
While US macro data points to a resilient economy and prospects for further policy tightening, a combination of domestic and global factors — such as China’s economic condition and inflation expectations — paints a complex picture, warranting caution before placing significant directional bets around Gold.
Investors and traders will also take cues from the US economic docket, with Existing Home Sales and the Richmond Manufacturing Index later in the North American session, as well as speeches by key FOMC members, providing potential impetus to XAU/USD.