Gold prices break free from a five-day losing streak, posting a 0.20% gain during the Asian session on Thursday, with the metal now trading around $1,920. Nevertheless, the precious metal faces headwinds as market participants contemplate the likelihood of a 25 basis point interest rate hike by the US Federal Reserve (Fed) by the close of 2023.
The Fed’s upcoming September meeting is imbued with hawkish sentiment, further buoying US Treasury yields. This bolsters the confidence of US Dollar (USD) bulls, with the 10-year US bond yield surging to 4.28%, a 0.05% increase at the time of reporting. The US Dollar Index (DXY), gauging the Greenback’s strength against six other major currencies, hovers around 104.80.
In addition to this, the US ISM Services PMI surged to a six-month high at 54.5 in August, surpassing expectations of 52.5 and the previous 52.7 reading. Conversely, the S&P Global Composite and Services PMIs slipped to 50.2 and 50.5, falling short of market consensus figures of 50.4 and 51.0. Notably, moderate US economic data has lent support to the US Dollar.
Investor sentiment remains subdued, marred by concerns over China’s deteriorating economic conditions and the ongoing trade tensions between the United States and China. These factors cast a cloud over investor sentiment and undermine the appeal of Gold.
However, it’s worth highlighting that the prevailing bearish sentiment in equity markets could provide some limited support to the precious metal’s price, given its safe-haven status.
Trade tensions between the US and China continue to escalate, potentially acting as a headwind for the price of gold. According to Reuters, US Commerce Secretary Gina Raimondo stated that revisions to the US tariffs imposed on China during the Trump administration are not expected until the ongoing review by the US Treasury Office is completed.