Gold’s appeal worsens following US labour data

Even if other countries are suffering from the effects of tight monetary policy, the US economy is nevertheless robust. The US service sector is experiencing strong demand, which would allow the Federal Reserve to keep the door open for additional policy tightening.

In comparison to estimates and the previous report of 1.6%, unit labour costs in the April-June quarter remained higher at 2.2%. The number of people requesting unemployment benefits for the first time decreased from 229K to 216K for the week ending September 1. Investors forecasted higher jobless claims at 234K.

The precious metal faces selling pressure as the US gains traction on further data showing a resilient economy. The Institute for Supply Management (ISM) agency reported better-than-anticipated Services PMI data for August, which landed at 54.5 against expectations of 52.5 and July’s reading of 52.7. As the sector accounts for two-thirds of the economy, the data points to continued strength in the US economic prospects and strong consumer spending.

Traders see a 93% chance for interest rates to remain unchanged at 5.25%-5.50% in the September policy meeting. Additionally, the chances that the central bank will keep the current monetary policy unchanged for the remainder of the year are stable at around 53%. Analysts at Goldman Sachs see a 15% chance that the US economy will slide into a recession as inflation cools down and job growth remains solid.

Prior to now, 20% of people expected that the US economy would be in recession. The US dollar appears poised to break over the immediate resistance level of 105, taking advantage of waning concerns about a US economic slowdown at a time when other countries are experiencing one.

The S&P Global Composite PMI for the Eurozone fell to 46.7 in August, its lowest level since November 2020. However, declining demand continues to put China at risk of deflation. Investors turn their attention to the Unit Labour Costs data for the April-June quarter, which will be released at 12:30 GMT. It is anticipated that labour costs rose at the same rate as in the first quarter, or 1.6%.

A higher-than-expected reading would demonstrate decent wage growth, which would elevate inflationary pressures. Speeches from Fed policymakers are also due: Chicago Fed Bank President Austan Goolsbee, New York Fed Bank President John C. Williams, and Atlanta Fed Bank President Raphael Bostic are set to speak. On Wednesday, the US Senate confirmed Philip Jefferson as vice chair of the Fed, while Fed Governor Lisa Cook was also confirmed to a fresh 14-year term.

The price of gold appears to be stabilising below $1,920 as it makes an effort to rise above the $1,920.00 barrier as the US Dollar remains strong due to pessimistic market mood. After failing to maintain above the 20-day and 50-day Exponential Moving Averages (EMAs), the precious metal is still under pressure. Momentum oscillators predict a lacklustre performance in the near future due to uncertainties about the outlook for interest rates.