Gold trades in tight range as upside looks capped by USD recovery
Gold (XAU/USD) continues trading in a familiar range just above $2,500 on Monday even as Asian stocks fall due to China-growth fears following the release of mixed Manufacturing Purchasing Managers Index (PMI) data. Whilst China's official NBS Manufacturing PMI fell deeper into contraction territory, the Caixin Manufacturing PMI beat estimates and rose into expansion territory.
Gold's wings clipped by recovery of US Dollar
Gold's price is facing a little bit of a headwind from the US Dollar (USD), which has bounced back from the year-to-date lows that reached last Tuesday when the US Dollar Index (DXY) touched down at 100.52. It is now trading back up in the 101.60s after the release of July's US Personal Consumption Expenditures (PCE) data on Friday showed inflation unchanged from the previous month. This, in turn, reassured markets that the US economy is probably heading for a "soft" rather than a "hard" landing.
The outlook for US interest rates, another major driver for the precious metal, remains about the same, with the probabilities of a 50 basis point (bps) cut in September still just above 30% and a 25 bps cut fully priced in, according to the CME FedWatch Tool.
Trading conditions will be thin on Monday as both the US and Canada are on holiday due to Labor Day. Employment data out this week ââ-š¬Ã¢â‚¬Å“ culminating in Nonfarm Payrolls (NFP) on Friday ââ-š¬Ã¢â‚¬Å“ however, will be a key deciding factor as to whether the Federal Reserve (Fed) will opt for a big half percent cut or a more standard quarter percent reduction.
Source: FXstreet
