- Xau/USD has decreased by 0.30% as traders look forward to Powell’s speech at Jackson Hole.
- The US PMI indicates stronger growth at an annual rate of 2.5%, yet unemployment has surged to its highest level since mid-2021.
- Federal Reserve officials have expressed concern that inflation poses a greater risk than employment issues, leading to tighter policies.
- Russia is insisting that Ukraine cede Donbas, along with a withdrawal of NATO and Western troops.
With a mix of US data being released and anticipation building for the Jackson Hole Symposium, gold prices are experiencing a retreat as they await Federal Reserve Chair Jerome Powell’s address on Friday. Currently, Xau/USD is down 0.30%, trading at $3,339.
The price movements of gold look set to continue fluctuating until Powell speaks. Recent data from S&P Global showed that business activity is growing steadily, with the agency noting, “The data indicates an economy expanding at an annual rate of 2.5%, up from an average growth of 1.3% seen in the first quarter.”
However, employment figures from the U.S. Department of Labor reveal a surprising increase in unemployment claims for the week ending August 16, surpassing expectations and last week’s numbers. Continued claims, which represent those reapplying for benefits, have reached the highest level since November 2021.
Various Federal Reserve officials are weighing in on these developments. Cleveland Fed’s Beth Hammack has expressed a hawkish view, supporting a “modestly restrictive policy to curb inflation.”
Kansas City Fed’s Jeffrey Schmidt noted the inflation risk now outweighs employment issues, and Atlanta Fed’s Rafael Bostic reiterated that current inflation is above target.
On a geopolitical note, reports from RIA indicate that Russian Foreign Minister Lavrov suggests Ukraine shows little interest in peace settlements. Meanwhile, sources from Reuters say President Putin is demanding that Ukraine cedes control of Donbas, with no NATO or Western troops present.
Daily Digest Market Mover: Gold Declines as US Business Activities Improve
- In August, the US S&P Global Manufacturing PMI Flash increased from an estimate of 49.5 to 53.3, exceeding July’s 49.8. The Service PMI also rose to 55.4, down from 55.7 but surpassing the anticipated 54.2.
- The S&P stated, “The increase in sales prices for goods and services indicates consumer price inflation may well exceed the Fed’s 2% target in the upcoming months. The price hikes noted in the survey, combined with improvements in business activities and employment, suggest a rate hike rather than cuts, depending on economic indicators and FOMC policies.”
- For the week ending August 16, initial unemployment claims rose to 235K, significantly higher than the 225K estimate. Continued claims also increased to 1.972 million, surpassing the forecast of 1.96 million.
- Cleveland Fed Hammack acknowledged that both inflation and unemployment are under pressure, expressing greater concern over high inflation. She noted that tariffs are beginning to impact the economy and reiterated the Fed’s focus on “too high inflation.” If a meeting were held tomorrow, she stated there would be no rate reductions.
- Kansas City Fed’s Schmidt highlighted plans to monitor inflation trends in August and September, mentioning that their policies are slightly restrictive and indicating a caution towards cutting interest rates.
- Fed Bostic in Atlanta pointed out that inflation is above target, mentioning that “unemployment has been consistent with full employment for a while.” He mentioned one potential rate cut in 2025, particularly as business contacts reported rising prices.
- U.S. Treasury yields are rising across the board. The yield on 10-year notes has increased by nearly 4 basis points to 4.328%. The US real yield, adjusted for inflation expectations, has also risen by 4 bps to 1.978% at this time.
- Expectations for a Fed rate cut in September have continued to diminish. Data indicates a drop from 85% a day prior to 72% as of now.
Technical Outlook: Gold price is below $3,350
Gold prices are currently situated below the convergence of the simple 20- and 50-day moving averages (SMA), ranging from $3,344 to $3,348, amidst a lack of clear direction. The relative strength index (RSI) has turned bearish, yet it remains near the neutral zone.
If Xau/USD surpasses the confluence of the 20- and 50-day SMA at $3,344/48, it may test the 100-day SMA at $3,306, which is more than $3,300. On the other hand, should gold break above $3,350, the next resistance is seen at $3,400, followed by additional levels like the June 16 peak at $3,452 and the $3,500 mark.
