The gold price, represented by XAU/USD, has staged a recovery following a dip to a weekly low of $1,913 during the early Asian session on Friday. As of the latest data, XAU/USD is showing an incremental uptick of 0.08% on the day, currently trading at $1,921.62.
In recent developments, Federal Reserve (Fed) Chairman Jerome Powell held a press conference on Wednesday, where he reaffirmed the Fed’s steadfast commitment to achieving a 2% inflation target. Powell’s statements carried an important implication that the Fed is prepared to take action by raising interest rates if deemed necessary.
Looking at the broader monetary policy landscape, the Fed’s most recent quarterly predictions have hinted at the likelihood of another interest rate hike within the current year. This could potentially push the benchmark overnight interest rate into a peak range spanning from 5.50% to 5.75%. Furthermore, the Fed’s long-term outlook on interest rates has been revised upwards, with officials now anticipating rates to hit 5.1% by the end of 2024, up from the previously projected 4.6%. These developments signal a shift toward tighter monetary conditions, increasing the opportunity cost of investing in non-yielding assets like precious metals and thus suggesting a more cautious outlook for gold.
Turning our attention to recent economic data releases, the US witnessed a decline in weekly Initial Jobless Claims, dropping to a notable low of 201,000 – a level not seen since January. On the flip side, the Philly Fed Manufacturing Index registered a concerning drop, slipping to -13.5 in September from a prior reading of 12.0, falling short of market expectations. In addition, Existing Home Sales for August reported a dip to 4.04 million on a monthly basis, down from the preceding figure of 4.07 million.
As the market continues to digest these economic indicators, gold traders are now closely monitoring the preliminary US S&P Global/CIPS PMI data scheduled for release later on Friday. The outcome of this data release is expected to provide valuable insights and potentially set a clear direction for the gold price, as it reflects the health of the US manufacturing sector. Traders will scrutinize these figures as they gauge the broader economic sentiment and its impact on the precious metal’s performance in the near term.