The price of Gold (TSE:XAU) declined as investors evaluated indications that China’s economy is struggling to rebound prior to the release of the Federal Reserve minutes later in the week.
China’s central bank unexpectedly lowered its main interest rate as it increased support for an economy burdened by viral lockouts and a deepening property crisis. Monday’s economic statistics indicated that the country’s recovery is waning, which might reduce physical demand for gold in the world’s top consumer.
Gold Price Analysis
The price of Gold (TSE:XAU)fell as much as 1.6% on Monday, following the longest streak of weekly increases in over a year, as the stronger dollar exerted downward pressure. Treasury yields dipped, which would ordinarily benefit bullion, but the bond yield curve remained significantly inverted, indicating concerns that the Fed’s monetary tightening to combat persistently rising inflation will trigger a US recession. The most recent data on manufacturing in New York State contributed to these concerns.
The US economy has applied emergency brakes, according to Naeem Aslam, the chief market analyst at Ava Trade. This has reminded the Fed that they need to be extra cautious with monetary policy, he said. He stated that the price of bullion must first surpass the psychologically significant milestone of $1,800 per ounce before continuing to rise.
Wednesday will see the release of the minutes from the Federal Reserve’s July meeting, which may shed light on the conditions that might drive the US central bank to tighten monetary policy substantially again in September. Financial market wagers on the next increase’s magnitude have fluctuated between 50 and 75 basis points.
According to Yeap Jun Rong, a market strategist at IG Asia Pte., the worst is likely past, despite the fact that US inflation is expected to continue to elevate into the fourth quarter. This could provide some near-term headwinds for Gold (TSE:XAU). Today’s decline may be attributed to profit-taking, since markets may have already priced in a substantial portion of the peaking-inflation narrative.
Investors are also keeping an eye on a congressional delegation’s two-day travel to Taiwan, which risks keeping tensions with China up following House Speaker Nancy Pelosi’s trip last month. Gold fell 1.3% to $1,778.37 per ounce as of 9:40 a.m. in New York, following a 0.6% increase on Friday.
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