Gold price sticks to seven-month lows as Fed policymakers support more rate hikes

NEW YORK (October 4) Gold price (XAU/USD) remains directionless as investors shift focus to the United States labor market data, which will set an undertone for the Federal Reserve’s (Fed) November monetary policy. The broader outlook for the precious metal is bearish as Fed policymakers continue to favor further policy tightening due to a resilient economic outlook.

The US Dollar faces barricades while extending its rally above 107.20 despite upbeat Job Openings data. Higher-than-anticipated job postings by US employers indicate strong demand for labor. Apart from the US ADP Employment Change data, investors will also focus on the US ISM Services PMI, which will deliver guidance on the demand outlook.

Daily Digest Market Movers: Gold price awaits labor market data

• Gold price turns choppy around $1,820 as investors await the ADP Employment Change data and the Institute of Supply Management (ISM) Services Purchasing Managers Index (PMI) data for September, which will be published at 12:15 GMT and 14:00 GMT, respectively.
• Investors foresee fresh additions to private payrolls of 156K, which is lower than the 177k reading from August. A decline in labor growth could provide some relief to the Gold price.
• The US ISM is expected to report the Services PMI for September at 53.6, lower than August’s reading of 54.5. The Services PMI data carries a significant impact on the US Dollar Index as it represents the service sector, which accounts for two-thirds of the US economy.
• The precious metal attempted a recovery near $1,820.00 on Tuesday but failed to capitalize on the same due to hawkish interest rate guidance from Federal Reserve policymakers and upbeat JOLTS Job Opening data.
• The US Bureau of Labor Statistics reported fresh job vacancies at 9.61 million against expectations of 8.8 million. Higher job postings by US employers signify healthy labor demand.
• Cleveland Fed Bank President Loretta Mester reiterated hawkish guidance on the interest rate outlook on Tuesday. Mester said that she is open to hiking interest rates further in the November monetary policy meeting if the economy remains resilient the way it has been. She acknowledged that costly long-term Treasury yields could reshape the monetary policy outlook.
• On Monday, Fed Mester said that one more interest rate hike is well-needed this year and that they are required to remain high for a longer period.
• Contrary to Mester, Atlanta Fed Bank President Raphael Bostic said, “There is no urgency for the Fed to raise interest rates further” but that interest rates must remain higher for a longer time before a rate cut. 
• About the rate cuts and inflation outlook, Raphael Bostic said that one rate cut could be announced in late 2024 and the core inflation would come down to 2% near the end of 2025.
• The US Dollar faces some selling pressure after refreshing its 11-month high near 107.20 as investors turned cautious about labor market data, which will set the undertone for the interest rate outlook.
• The broader outlook of the US Dollar is positive as the US economy is resilient, unlike other economies that are struggling to cope with the consequences of higher interest rates by central bankers. The 10-year US Treasury yield jumped to a multi-year high at 4.85%.
• US Treasury Secretary Janet Yellen remained optimistic about the US economic outlook, adding that inflation is coming down in the short term and the labor market is extremely strong.

FXStreet