Gold Rebounds, Fed Cut Eyed
Gold prices (XAU/USD) rose slightly at the start of the European session and briefly recouped some of the losses they had reached a two-week low the previous day. The US dollar rally, which had strengthened following the PPI data, has now eased as the market remains confident that the Fed will cut interest rates again in September, resulting in a slight recovery in interest in gold—a non-yielding asset.
However, gold's gains remain unconvincing. Recent inflation concerns have limited hopes for aggressive easing, while risk-on sentiment in the stock market has discouraged market participants from establishing large long positions in gold. Investors are likely to wait for confirmation of further buying before assessing that the decline has bottomed out.
The next focus will be on US macro data ahead of the weekend. Releases such as retail sales and consumer sentiment will provide clues as to whether inflation and purchasing power remain strong, which in turn will influence the dollar, Treasury yields, and the direction of gold.
In the short term, further weakness in the dollar and yields could open up room for a recovery in gold. Conversely, if US data comes back stronger than expected, the dollar could strengthen again and put pressure on gold prices.
Key Point:
The post-PPI dollar rally weakened, helping gold gain slightly.
The market still sees a high probability of a Fed cut in September, but not a major one.
Risk-on sentiment and inflation concerns are holding back aggressive buying interest in gold.
Investors are awaiting US macroeconomic data to determine the next direction.
Source: Newsmaker.id
