- The price of gold rises thanks to the fall in the yield of US Treasury bonds, which weakens the dollar.
- Improved sentiment keeps global stocks in the green.
- Weakening US manufacturing data and falling job openings on Tuesday show the economy is feeling the Fed’s hand.
- Fed officials have repeatedly stated the need to raise rates in an environment of high inflation.
The Prayed advanced to three-week highs on Tuesday as US Treasury yields continue to fall amid US economic data showing Federal Reserve increases to the funds rate (FFR) began to impact the economy as the US central bank struggles to tame inflation. At the time of writing, XAU/USD is trading at $1,723 a troy ounce, up 1.40%.
Changes in market sentiment keep global equities on a good footing. The dollar weakens as US Treasury yields fall like a stone, with the US 10-year bond yield down six basis points to 3,587%. The 10-year Yield on Equity Securities (TIPS), a gauge of real returns, has fallen to 1.367%, having hit a yearly high of 1.70%.
US economic data released on Monday gave signs that manufacturing activity in the country is slowing. Subcomponents of the ISM reports portrayed that new orders are contracting while prices are easing.
During the session on Tuesday, August factory orders were published unchanged on the docket, after the 1% drop in July, according to the Commerce Department. At the same time, job openings in the US fell, although they remained at higher levels, according to the Labor Department. The US JOLTs report for August showed vacancies fell from 11.239 million in July to 10.053 million in August.
So the Fed’s decisions are beginning to work, but Fed officials remain focused on reducing inflation.
A reflection of the above is that the president of the New York Fed, John Williams, said that although the tightening of monetary policy has begun to control demand and reduce inflation, “our work is not yet finished.” Williams added that the policy “is not yet in a restrictive place for growth”, according to him, the rates must go up.
Later, the Atlanta Fed’s Bostic said changes in global supply chains are putting upward pressure on prices. For his part, Barkin, of the Richmond Fed, added that the strength of the dollar may have indirect effects on the world economy, but stressed that the Fed is focused on the US economy.
On Tuesday, Mary Daly of the San Francisco Fed said the Fed is committed to reducing inflation and echoed comments from the New York Fed’s Williams about the need for additional rate hikes. types.
What must be considered
On the US economic docket, ADP Employment Change will be released, along with US International Trade, S&P Global Services and Composite PMIs for September.
XAU/USD Key Technical Levels
Source: Fx Street
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