Gold is seen range-bound ahead of the US FOMC decision next week
inflation readings in the US, Australia, New Zealand, and the UK came in short of forecast, which has given rise to a possibility of key central banks soon hitting a pause button in their rate hike mission aimed at reining in inflation. Apart from inflation, the somewhat weaker-than-expected US nonfarm payroll report for June has also played a key role in reinforcing peak rate possibility. The narrative of the peak rate pushed the US yields sharply lower.
Yields on ten-year US treasuries fell from 4.09% seen on July 7, the highest since March, to 3.72% on July 18. Similarly, two-year US yields tumbled from 5.12% on July 6 to 4.65% on July 18. The sharp decline in the yields gave way to an upward correction in the latter part of the week on better-than-expected US weekly jobless claims for July 15 (actual 228k, forecast 240k, prior 237k) and Philadelphia Fed business outlook prices received (July) surging to the highest level since January.
The US Dollar Index, which tumbled to 99.58 on the possibility of the Federal Reserve stopping hiking rates after its July hike, recovered to reclaim the 101 mark as yields moved higher. The US Dollar Index closed with a weekly gain of around 1% at 101.08. Two-year yields at 4.846% were up by around 1.75% on the week, while ten-year yields closed the week with a gain of around 1 bps at 3.837%.
Rising yields and a rebound in the US Dollar Index pushed the metal lower Friday. Gold closed with a loss of 0.52% at $1961.96 Friday. Macroeconomic data out of Europe have been hardly encouraging.
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