The price of gold (XAU/USD) retreated to $2,320 from recent highs near $2,368 during early Asian trading on Monday, influenced by robust US economic indicators. The stronger-than-expected US Purchasing Managers Index (PMI), released on Friday, exerted downward pressure on the precious metal.
US economic data for June has shown mixed signals, with the S&P Global revealing that the advanced US Composite PMI rose to 54.6, surpassing expectations and marking its highest level since April 2022. The Manufacturing PMI climbed to 51.7, and the Services PMI increased to 55.1, both exceeding May’s figures and consensus estimates.
Federal Reserve officials have adjusted their timeline for potential interest rate adjustments this year. Richmond Fed President Tom Barkin commented that while the Fed is prepared with necessary measures, further insights will be gained in the coming months. Minneapolis Fed President Neel Kashkari indicated it could take a year or two to bring inflation back to target levels.
The hawkish stance of Fed policymakers, combined with robust US economic data, bolstered the US Dollar and weighed on gold prices. Higher interest rates typically diminish the appeal of non-yielding assets like gold, increasing their opportunity cost.
However, geopolitical and economic uncertainties continue to support safe-haven flows into gold. Concerns heightened over the weekend following remarks by the UN Secretary-General regarding potential escalation between Israel and Hezbollah. The situation was underscored by reports of casualties from Israeli airstrikes in Gaza City.
As investors await further economic indicators such as the final reading of US Gross Domestic Product (GDP) and Core Personal Consumption Expenditures (PCE) Price Index later this week, market sentiment towards gold remains cautious amid fluctuating economic data and global tensions.
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