U.S. PMI data leads the world, the dollar soars and falls, but be wary of the pullback of London gold!
First Gold Network, July 25th, the last trading day, the PMI data released by the United States led the world, and the US dollar index said it had reached its highest level in the past two weeks. Affected by this, London gold fell under pressure. On Tuesday (July 25), the U.S. dollar index fell back quickly in the short term, falling to around 101.30. Weaker dollar boosts gold pricesStronger, London gold is currently trading at $1963 per ounce.
On Tuesday (July 25), London gold opened at US$1955.00 per ounce. As of press time, London gold temporarily recorded US$1963.09 per ounce, an increase of 0.41%.
London gold prices were on the defensive for the fifth straight day, at their lowest level in a week. As a result, the US PMI numbers are relatively good relative to economic activity data from the UK, Eurozone and Australia.
Data show that the initial value of the US S&P global manufacturing PMI in July rose to 49.0 from the previous 46.3 and the market forecast of 46.4, while the services PMI fell to 52.4 from the expected 54.0 and the previous 54.4. As a result, the Composite PMI edged down to 52.0 from 53.2 previously and the consensus forecast of 53.1. The Chicago Fed’s National Activity Index slipped to -0.32 in June from -0.28 (revised) previously and the consensus forecast of 0.03.
Upbeat U.S. retail sales data for June replaced downbeat U.S. housing and economic activity data last week, supporting the dollar’s rebound from its weakest level in 15 months. However, previously released cues on U.S. employment and inflation have been downbeat, pointing to concerns about the Fed’s policy shift in July, which in turn has fueled dollar bulls in the near term.
On the other hand, the initial HCOB manufacturing PMI in the euro zone fell to its lowest level since May 2020, from 43.4 previously to 42.7 in July, below market forecasts of 43.5. Likewise, Germany’s HCOB Manufacturing PMI fell to a 38-month low, while Services and Composite PMIs came in below market expectations and prior data for July.
In addition, the UK’s July S&P global/CIPS manufacturing PMI initial value fell to the lowest level in 2023, while Australia’s July S&P global manufacturing PMI initial value rose to 49.6 from 48.2 before, but the service industry PMI fell from 50.3 to 48.0 below 50.0, indicating a contraction in economic activity. As a result, US PMIs were relatively upbeat and thus underpinned the dollar’s fifth straight day of gains despite the unimpressive data releases. That said, the U.S. dollar index DXY rose for the fifth day in a row, hitting its highest level in nearly two weeks, while the euro fell across the board, which in turn weighed on London gold prices.
In the Asian market on Tuesday, the U.S. dollar index fluctuated and fell slightly. It is currently trading around 101.30, but it still holds on to most of the overnight gains.
Looking ahead, the Fed isn’t the only central bank meeting this week, with the European Central Bank and Bank of Japan also holding policy meetings that could affect global markets.
Of the three central banks, the Bank of Japan is the most likely to launch a market-moving surprise move that could tweak its yield curve control policy, traders said.
Futures markets expect the Fed’s overnight rate to rise to 5.41% in November and stay above 5% until May 2024.
London gold is highly sensitive to rising interest rates, because rising interest rates will increase the opportunity cost of holding non-yielding London gold.
Kinesis Money market analyst Carlo Alberto De Casa said in a report: “Any dovish surprise, especially from the Federal Reserve, could be beneficial to London gold, and gold prices are likely to break through the $2,000 mark again.”
The U.S. dollar index edged up 0.30% to 101.38, making London gold more expensive to hold in other currencies, limiting its upside.