Gold Trims Declines, US PMI Data in Market Focus
Gold prices began to rebound from session lows on Tuesday (June 23rd), after the latest data showed stronger-than-expected growth in US business activity. S&P Global reported that the US composite PMI index rose to 52.2 in June, higher than May's 51.5 and exceeding economists' estimates of 50.8. A reading above 50 indicates expansion, suggesting the US economy remains robust despite the shadow of high interest rates and geopolitical pressures.
Despite paring losses, gold remains under significant pressure. Spot gold previously fell nearly 2% to around US$4,119 per troy ounce, while US gold futures weakened to around US$4,139. The main pressure came from the strengthening US dollar, which remained near its highest level in more than a year. A stronger dollar makes gold more expensive for holders of other currencies, thus limiting buying interest in the precious metal.
The stronger-than-expected PMI data sent a double signal for the gold market. On the one hand, the continued expansion of the US economy could ease recession fears and make investors more confident in riskier assets. However, on the other hand, strong data could also reinforce the view that the Federal Reserve still has room to maintain high interest rates or even raise them again this year. This situation weighs on gold because the precious metal does not provide a yield.
The manufacturing sector was the strongest sector in the report. The manufacturing PMI rose to 55.7, its highest level since May 2022, as factories increased production to meet a surge in new orders. However, S&P Global also noted that some manufacturing growth was still driven by stockpiles due to concerns about supply disruptions and rising prices. This means that the strength of the data does not fully reflect healthy and sustainable demand.
From a geopolitical perspective, progress in talks between the United States and Iran remains a factor contributing to the safe-haven demand for gold. The United States has granted a 60-day waiver of sanctions on some Iranian oil sales after initial talks in Switzerland were deemed constructive. If energy supplies from the Middle East recover, oil prices could be more manageable and energy inflation pressures could ease. However, the market remains cautious as the risk of conflict has not completely disappeared. Investors' primary focus is now on the US Personal Consumption Expenditures (PCE) inflation data, due to be released on Thursday. This data is the Fed's favorite inflation indicator and will significantly determine gold's future direction. If the PCE shows inflation remaining high, expectations of interest rate hikes could intensify, putting gold at risk of falling back to the US$4,100 to US$4,000 area. However, if inflation begins to subside, gold has the potential to sustain its rebound and retest the US$4,165 to US$4,200 area. (arl)
Source: Newsmaker.id
