GOLD PRICE PREPARES FOR FRESH UPSIDE AS YIELDS STRUGGLE

Gold price prepares to extend upside ahead of US PMI data.

Fed’s Barkin hopes that the US recession will be “less severe”.

Strength in Gold prices has come from restrictive upside in US Treasury yields.

Gold price (XAU/USD) strengthens this week as the rally in US Treasury yields halts amid fading hopes of more interest-rate increases from the Federal Reserve (Fed). US headline Consumer Price Index (CPI) has come down to 3.2% from its peak of 9.1% due to an aggressive rate-tightening cycle, but the Fed will likely have to keep interest rates higher for a longer period as the remaining excess inflation above the desired rate of 2% seems extremely stubborn.

In his commentary at the Jackson Hole Symposium, Fed Chair Jerome Powell is expected to explain the benefits of keeping rates higher for longer and he is also likely to avoid supporting further policy-tightening in the absence of encouraging economic data. Before the Jackson Hole event, investors will keep an eye on preliminary S&P Global PMI data, which will be released at 13:45 GMT.

Daily Digest Market Movers: Gold price awaits Jackson Hole event for further action

Gold price consolidates marginally above $1,900, supported by sluggish US Treasury Yields ahead of the Jackson Hole Economic Symposium.

10-year US Treasury Yields dropped below 4.30% as Fed Chair Jerome Powell is not expected to explicitly refer to further policy-tightening at the Jackson Hole event.

Richmond Fed Bank President Thomas Barkin said the recent moves in bond yields are not a sign of inappropriate market tightening but rather likely a response to strong economic data.

About the interest rate guidance, Thomas Barkin said if inflation remains high and signs of a drop in demand remain absent. The situation will force the need of tighter monetary policy.

Fed Barkin further added that the recession situation in the US economy will be “less-severe’’.

Investors expect Powell will suggest that interest rates are likely to remain higher for a longer period so that inflation can return to 2%.

Apart from the interest rate guidance, investors will also focus on the labor market and the inflation outlook.

Market participants expect that Fed policymakers will have to spend more blood and sweat to shred the ‘last mile’ of inflation, which is the remaining path towards the desired rate of 2%. Therefore, the Fed is expected to keep interest rates higher for longer.

On Wednesday, investors will focus on the preliminary S&P Global PMI data for August, which will be published at 13:45 GMT.

According to estimates, the Manufacturing PMI is expected to increase to 49.3 in August from 49.0 in July. The Services PMI is seen declining slightly to 52.2 from 52.3 a month earlier. 

After the preliminary S&P Global PMI, investors will shift their focus to the Durable Goods Orders for July, which will be released on Thursday at 12:30 GMT. Orders are expected to contract by a sharp 4.0%. In June, Durable Goods Orders expanded by 4.6%.

The US Dollar Index (DXY) delivers a solid break above the crucial resistance of 103.70 as investors continue to flush liquidity due to strong US economic resilience.

Meanwhile, the US bank regulator Federal Deposit and Insurance Corporation (FDIC) will propose new rules overhauling how large regional banks are prepared for a potential failure on August 29. US bank regulators are worried about potential risks due to rising borrowing costs.

US National Security Adviser Jake Sullivan said on Tuesday that US Commerce Secretary Gina Raimondo will travel to China next week with a message that the US is not seeking to decouple from China, reported Reuters.

Technical Analysis: Gold price delivers three-day positive closing

Gold price attempts to deliver a break of the consolidation formed in a range of $1,885-1,900 in the past week.  The precious metal rebounds after hitting a fresh five-month low near $1,885.00. However, the broader bias is still favoring the downside due to strengthening US Treasury yields. Despite a three-day recovery, the yellow metal struggles around the 200-day Exponential Moving Average (EMA). Declining 20 and 50-day EMAs indicate a bearish mid-term trend