Gold is trading around $1830, having dropped back below its 200DMA as the buck/US yields rise pre-key US data releases.Gold bulls want to see evidence of weakening US growth/inflationary pressures and a paring of Fed tightening bets.
As the rise in longer-term US bond yields enters its third day, with the 10-year yield now up around 17 bps versus last week’s lows around 2.70%, and as the US Dollar Index’s recovery from this week’s multi-month lows extends, spot gold (XAU/USD) prices have not surprisingly come under pressure. XAU/USD was last trading around the $1830 per troy ounce mark, below its 200-Day Moving Average at $1840 and taking losses on the week to around 1.1%.
Key upcoming US economic data is in focus, the most important release being Friday’s May labour market report, though traders will also closely scrutinised Wednesday’s ISM Manufacturing PMI survey that is slated for release at 1400GMT. Gold bulls want to see evidence that inflationary pressures are backing off, meaning people will be watching the Prices Paid subindex of Wednesday’s ISM PMI survey and the wage growth component of Friday’s jobs report.
Any such evidence will lessen the pressure on the Fed to tighten monetary policy settings quite so aggressively beyond the planned 50 bps rate hikes at the June and July meetings. Gold bulls will also want to simultaneously see evidence of a slowing US economy, as this further spurs the demand for safe-haven assets (like gold) and reduces pressure on the Fed to hike. In the best-case scenario of weak/less inflationary data in the coming days, if that also spurs a drop once again in the US dollar/US yields, XAU/USD might well recover back to the north of its 200DMA and the $1850 mark.
EUR/USD slumps below 1.0700 as dollar gathers strength
EUR/USD came under renewed bearish pressure and dropped below 1.0700 in the American session on Wednesday. The data from the US showed that the business activity in the manufacturing sector continued to expand at a robust pace in May, helping the dollar continue to gather strength against its rivals.
GBP/USD extends slide toward 1.2500 as DXY rally continues
GBP/USD has extended its daily slide in the American session on Wednesday and touched a fresh weekly low below 1.2500. Rising US Treasury bond yields provide a boost to the greenback with the US Dollar Index climbing to a 10-day top near 102.50.
Gold retreats toward $1,840 as US yields push higher
Gold has lost its traction after having recovered toward $1,850 earlier in the day and retreated to $1,840. On the back of upbeat US data and the BOC’s decision to hike the policy rate by 50 basis points, US T-bond yields push higher, limiting XAU/SUD’s upside.