Gold prices remain under pressure amid strong US economic data; focus now on CPI data this week
Gold prices faced downward pressure throughout the week due to encouraging US economic data, with the upcoming focus on the Consumer Price Index (CPI) developments in the coming week. This resulted in gold experiencing its first weekly decline in three weeks.
The US 10-year treasury note yield climbed towards 4.3%, supported by a surprising drop in US weekly jobless claims to their lowest level since February. Additionally, the ISM Services PMI for August 2023 unexpectedly surged to 54.5, indicating the strongest growth in the services sector in six months.
The Federal Reserve expressed concerns that this robust economic activity could lead to continued inflationary pressures, potentially necessitating further tightening.
Moreover, the extension of the OPEC+ output cut led to a rise in oil prices, contributing to inflationary risks.
The US dollar index reached a six-month high of 105 levels, driven by dampened risk sentiment due to disappointing Services PMI reports from China and the Eurozone. In August 2023, the Eurozone Composite PMI was revised lower to 46.7, marking the most significant contraction in private sector activity since November 2020.
Meanwhile, China's Caixin Services PMI decreased from 54.1 in July to 51.8 in August, suggesting a waning economic recovery and undermining earlier optimism linked to government stimulus measures. Although China's trade data for August surpassed forecasts, both exports and imports declined, reflecting weakened domestic and overseas demand.
Within the Federal Reserve, there exists a division concerning whether to implement one more interest rate hike, although most members agree that rates should remain elevated for an extended period.
