Gold’s Decline Persists Amidst Strengthening Dollar and US Monetary Policy Dynamics

For the third consecutive day, GOLD demonstrates a bearish tendency, receding further from its nearly month-high zenith between $1,952 and $1,953 experienced last week. During the Asian trading hours, the XAU/USD dipped to its lowest in over a week. However, the decline was modest and has currently stabilized near the $1,925 mark, reflecting a subtle daily depreciation of under 0.10%.

The prevailing sentiment endorses the view that the Federal Reserve will sustain elevated interest rates for an extended period. Such a stance has propelled the US Dollar to levels unseen since March 10, adversely affecting the GOLD value. Anticipations are rife regarding the Federal Reserve’s decision to halt its rate hikes during the September policy review. These anticipations were reinforced by remarks from Fed Governor Christopher Waller, who emphasized the absence of any immediate drivers to escalate short-term borrowing expenses. Nevertheless, consistent US macroeconomic data suggests unyielding economic vigor and a stable inflation rate, reinforcing the Fed’s inclination towards a stringent monetary stance in the upcoming phase.

Market dynamics still reflect prospects of an additional 25 bps rate enhancement before this year concludes. This scenario underpins the ongoing resilience of US Treasury bond yields, bolstering the dollar and applying downward pressure on the non-yielding GOLD value. However, global apprehensions, including subdued business activity momentum in China, as revealed by a recent private survey, offer some protection against a more profound gold price dip, enhancing the metal’s status as a refuge in volatile times.

Adding complexity to the equation are the continuous US-China trade frictions, which may redirect some safe-haven flows toward GOLD . It’s noteworthy to mention the stance of US Secretary of Commerce Gina Raimondo, who anticipates a status quo regarding US tariffs on China until the US Treasury review concludes. Consequently, traders should exhibit prudence before interpreting the recent gold price rebound from the $1,885 mark as ephemeral. Market participants are now keenly awaiting the US ISM Services PMI release, which could mold USD dynamics and influence the trajectory for the cherished metal.