Moreover, U.S. President Joe Biden’s withdrawal from the 2024 presidential race raises hopes that Donald Trump will become the next president and create a more relaxed regulatory environment.
Gold prices rise on weaker US dollar and major economic data
The US dollar has generally lost momentum and is weakening due to a dovish outlook for the Fed. Market participants expect the central bank to start lowering borrowing costs in September and potentially cut rates two more times by the end of the year. This outlook has pushed down Treasury yields, putting pressure on the dollar and supporting gold prices.
Going forward, traders will be keeping an eye on Tuesday’s U.S. economic data (such as existing home sales and Richmond manufacturing index) for short-term trading opportunities. However, the main focus will be on the preliminary U.S. Q2 GDP data on Thursday and the U.S. Personal Consumption Expenditures (PCE) Price Index on Friday. Additionally, preliminary PMIs due this week will provide a clearer view of the global economic performance.
Chances of a Trump presidency and its impact on gold prices: Biden backs out
Investors had little reaction to President Joe Biden ending his reelection campaign, expecting the U.S. stock market to benefit from Trump’s policy proposals.
A second term for President Trump is expected to bring about higher inflation, which will drive up Treasury yields. The expectation of higher yields and inflation could scare investors away from gold (XAU/USD), which could lead to a drop in gold prices.
People’s Bank of China rate cut boosts global market sentiment, putting pressure on gold prices
Global market sentiment turned bullish following an unexpected interest rate cut by the People’s Bank of China (PBoC), which cut the one-year prime loan rate, five-year prime loan rate and seven-day reverse repo rate by 10 basis points each to 3.35%, 3.85% and 1.7%, respectively.
