Gold price eyes US ISM Manufacturing PMI before key jobs data

Gold prices are under pressure as hopes for a 50 basis point (bps) interest rate cut by the US Federal Reserve (Fed) this month diminish. This shift follows the release of the July US core Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred inflation gauge, which showed a 2.6% year-over-year increase and a 0.2% month-over-month rise in August, aligning closely with market expectations.

As a result, market participants are scaling back their expectations for a significant rate cut at the Fed's upcoming September 17-18 policy meeting. Currently, the CME Group’s FedWatch tool indicates a 31% probability of a 50 bps cut and a 69% chance of a smaller 25 bps cut.

This adjustment in rate expectations has strengthened the US Dollar (USD), which is trading near its weekly highs against major currencies. The USD's resurgence, coupled with stable US Treasury bond yields, has negatively impacted the gold price, which is denominated in USD.

Despite the current downward pressure, the sustainability of gold's decline remains uncertain. Traders are eagerly awaiting Friday’s US Nonfarm Payrolls data, which will provide further insights into the Fed's likely rate decision this month.

Before the release of the employment data, gold traders will be closely watching the US ISM Manufacturing PMI due later on Tuesday, along with Wednesday’s Job Openings and ADP Employment Change data. The ISM Manufacturing PMI is expected to improve to 47.5 in August from 46.8 in July, while the Price Paid component is anticipated to decrease slightly to 52.5 from 52.9 in July.

Should the ISM Manufacturing PMI or the Price Paid Index show a larger-than-expected decline, it could reignite hopes for a 50 bps Fed rate cut, potentially weakening the US Dollar and providing support for gold prices. However, market caution is likely as US traders return from the extended weekend and ahead of the critical employment data release. #Gold #Analysis #PMI #ISM