Gold price edged higher at the onset of the week following the easing of the Treasury yields and US dollar. Investors are keen on the US inflation data scheduled for release on Wednesday.
Fundamentals
On Friday, data released by the US Labor Department showed that nonfarm payrolls rose by 528,000 in July compared to the forecast 250,000 and prior month’s 398,000. Indeed, the figure was the highest since February.
By highlighting a strong labor market, the data strengthened the US dollar while weighing on gold price. Indeed, the jobs report added to the case of further policy tightening by the Federal Reserve.
However, a look at the market in Monday’s session indicates that investors are somewhat eased on their expectations of an ultra-hawkish Fed. Subsequently, the greenback and Treasury yields have parred their previous gains while boosting gold price.
As is the case with other dollar-priced commodities, gold tends to move inversely to the value of the greenback. While the dollar index edged lower on Monday, it remains steady above the critical zone of $105.00. This explains why gold price gains were curbed for the third session in a row.
US inflation data
In the ensuing sessions, gold price will likely remain range-bound as investors await the US CPI data for further cues on the Fed’s next move. Economists expect a reading of 8.7% YoY compared to the prior month’s 9.1%.
On the one hand, an environment of high interest rates has been weighing on gold price. However, concerns over a global recession, coupled with the heightened US-China tensions, has sustained the precious metal above the critical zone of $1,750 for close to two weeks now. Indeed, I expect the aforementioned level to remain a steady support zone for the short term as a 75 basis points rate hike is yet to be locked in.
