Gold prices rebounded from around $3,311 on Wednesday, but settled back near $3,338 today as investors took a cautious approach to wait for a new trigger for the market.
The focus today is on preliminary US manufacturing and services Purchasing Managers’ Index (PMI) data, with attention increasing ahead of Federal Reserve (Fed) Chairman Jerome Powell’s speech in Jackson Hole on Friday.
Key Factors Driving Markets
Fed Minutes Support Dollar, But Limited ImpactThe minutes of the July Fed meeting showed only two officials supporting a rate cut, providing temporary support to the US dollar. However, investors considered the minutes to be 'outdated' as weaker employment and consumer inflation (CPI) data in July have reinvigorated expectations of two rate cuts in 2025.
Fed Independence Issues in FocusGold rose sharply yesterday after Donald Trump called on Fed Governor Lisa Cook to resign over alleged involvement in the mortgage lending scandal. Cook rejected the political pressure and vowed to defend herself. The renewed concerns about the Fed's independence weakened the dollar, helping gold recover from its lows.
US PMI Data As Temporary CatalystThe early August PMI will provide a snapshot of business activity in the US. If the reading is stronger than expected, the dollar may strengthen again and put pressure on gold. Conversely, weak data could increase demand for gold as a safe haven.
Jackson Hole to Focus Traders expect Powell to try to reduce speculation of an overly aggressive rate cut, highlighting the risk of inflation stemming from tariffs. Ahead of the speech, investors may take profits and cause short-term volatility in gold prices.
Market Implications & Risk Assessment
Fed Minutes (long view) Little support for USD Market still expects 2 rate cuts in 2025
US PMI data (today) Big volatility driver Re-set Fed policy expectations
Powell's Jackson Hole speech Key market risk provides policy guidance Sets pace for rate cuts by year-end
Fed independence issues Weaken USD, support gold Could be a recurring issue in the market
Conclusion
For now, gold is still moving in a limited range between $3,314 and $3,350. Today's PMI data results are expected to set the immediate direction, while the market has started to focus on Powell's Jackson Hole speech as a major determinant of rate cut expectations and gold's direction this year.
Until then, gold prices are expected to continue to hover in volatile movements driven by headline news, with the risk of either profit-taking or sudden price movements.
