Gold price trends recently experienced a significant drop after reaching a two-week peak of $2,477. This decline occurred in response to weaker-than-expected US economic data. As a result, the US Dollar weakened, and Treasury yields decreased. Speculation that the Federal Reserve might cut interest rates sooner than anticipated influenced these movements. Currently, XAU/USD trades at $2,420.
Gold Price Movement Following US Economic Data
Gold price trends saw a notable drop of nearly 1% after touching a two-week high. This was driven by disappointing US economic data that affected the Greenback and US Treasury yields. On Friday, the US Nonfarm Payrolls data fell short of expectations. The figures revealed an addition of only 114K jobs in July, compared to the anticipated 175K. Additionally, the previous month’s numbers were revised downward from 206K to 179K.
Impact of Economic Indicators on the US Dollar and Treasury Yields
The ISM Manufacturing PMI report also added to the economic concerns. The Unemployment Rate increased from 4.1% to 4.3%, and Average Hourly Earnings decreased from 0.3% to 0.2%. These factors contributed to a sharp rally in bullion prices. The US 10-year Treasury bond yield fell by over 15 basis points, dropping to 3.815%. The Greenback also suffered, with the US Dollar Index (DXY) falling more than 1.13% to 103.16.
Market Expectations and Federal Reserve Speculation
Following the economic data, banks began adjusting their expectations for Federal Reserve policy. Bank of America predicts an initial rate cut in September, earlier than previously expected. Citi and JP Morgan also anticipate a 50 basis point reduction in September and November. This speculation has influenced gold prices and market sentiment.
Technical Outlook for XAU/USD
Gold prices have retreated toward the July 31 lows of $2,404-$2,410. This retreat may be due to profit-taking before the weekend. Technically, XAU/USD remains bullish. A daily close above $2,450 could challenge the all-time high, potentially pushing prices toward $2,500. However, if prices weaken further, they might drop below $2,400, possibly reaching the 50-day moving average (DMA) at $2,364. A further decline could test the 100-DMA at $2,337.
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