Gold’s recent surge continues as it climbs towards the $1,920 mark, attracting significant attention during the European session today. This upward trajectory is primarily driven by various factors, including a noteworthy correction in the US Dollar’s value.
One key catalyst behind this gold rally is the optimistic economic data recently unveiled by China’s National Bureau of Statistics (NBS). These numbers showcase encouraging trends, providing a boost to the precious metal market. In addition, the People’s Bank of China (PBoC) recently decreased the Reserve Requirement Ratio (RRR) by 25 basis points (bps), further underpinning gold prices.
China’s Retail Sales (YoY) demonstrated robust growth at 4.6%, exceeding expectations of a mere 3.0% increase for August. This is a substantial improvement compared to the previous month’s 2.5% figure. Furthermore, Industrial Production also outperformed estimates, posting a growth rate of 4.5% in August, in contrast to a 3.7% rise in July.
Meanwhile, the US Dollar Index (DXY) has retreated from its six-month high, currently hovering around 105.20. However, the possibility of a significant downtrend in the Greenback remains limited, primarily due to the cautious approach of market participants in response to the US Federal Reserve’s (Fed) hawkish stance on monetary policy.
Additionally, US Treasury yields have rebounded from intraday losses, with the 10-year US bond yield standing at 4.30% at the time of writing. These improved yields could act as a supporting factor for the US Dollar.
Market sentiment towards non-yield assets like gold is anticipated to be adversely affected by the Fed’s commitment to a more stringent monetary policy, which could involve additional interest rate hikes or tightening measures. Consequently, traders may exhibit hesitancy in establishing substantial positions in the precious metal. Therefore, the focus will remain on monetary policy decisions and the Fed’s communications as pivotal factors influencing the USD’s near-term movements.
Furthermore, recent economic data from the United States has generally been positive. Initial Jobless Claims for the week ending September 8 surpassed expectations with only 220,000 new claimants, slightly better than the previous week’s figure of 217,000.
The Core Producer Price Index (PPI) for August matched expectations with a 2.2% increase, though it was slightly lower than the previous rate of a 2.4% rise. Additionally, Retail Sales showed improvement, rising to 0.6% compared to the previous month’s 0.5%, surpassing market expectations that had predicted a slowdown to 0.2%.
Collectively, these economic indicators suggest a relatively healthy economic environment in the US, exerting a substantial influence on market sentiment and trading decisions.
Investors will keep a close watch on the upcoming release of the US preliminary Michigan Consumer Sentiment Index during the North American session. Market consensus anticipates a minor decline from the previous reading of 69.5 to 69.1, which could further shape market dynamics.