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Gold Prices Jump on Rate Cut Hopes, Dollar Stumbles After Dovish Fed
Gold prices surged to over $2,310 per ounce on Monday, bouncing back from nearly a month-low last week. Traders are observing remarks from various Federal Reserve officials this week to estimate potential rate cuts, especially after disappointing US labor data for April. The data showed a slower job growth rate than expected, strengthening the likelihood of rate cuts later in the year. According to CME's FedWatch Tool, there's a 67% chance of a rate cut in September. Lower interest rates make holding gold more attractive since it doesn't yield interest. However, in India, demand for physical gold remained subdued last week despite price drops, as buyers are waiting for bigger price declines. Meanwhile, Chinese premiums dropped for the second consecutive week due to weak holiday demand.
On Monday, the dollar index stabilized above 105.00 as investors evaluated the Federal Reserve's monetary policy stance and awaited upcoming central bank statements. Last week, the index declined approximately 1% after the Fed kept interest rates unchanged, and Chair Powell reiterated the central bank's inclination towards easing despite inflation concerns. Additionally, April's job data revealed a lower-than-expected increase of 175,000 jobs, further supporting market expectations of rate cuts, with a November cut fully anticipated. The dollar also faced pressure from the yen's strong rally last week, amid suspicions that the Bank of Japan intervened heavily to bolster its currency, spending over 9 trillion yen in the process.
The Japanese yen weakened towards 154.00 per dollar, retracting some of its gains from last week due to a public holiday, though concerns about government intervention persist. Last week, the currency surged by up to 5.2% on suspicions of intervention, with Bank of Japan data indicating significant spending to support it. Analysts suggest this intervention only offers temporary respite as underlying market conditions remain unfavorable for the yen. The yen has faced downward pressure this year as the Bank of Japan maintains ultra-low interest rates despite higher rates abroad, prompting investors to borrow yen for investment in higher-yielding currencies. However, expectations of two rate cuts by the US Federal Reserve this year may ease pressure on the yen.
In April 2024, the Caixin China General Composite PMI rose slightly to 52.8 from 52.7 in March, marking the highest level since May 2023. This indicates the sixth straight month of growth in private sector activity, driven by strong performance in both manufacturing and services. New orders increased notably, but employment levels declined for the third consecutive month. Input and output prices remained low, mainly due to subdued manufacturing factory gate prices. Overall, sentiment remained steady. Dr. Wang Zhe of Caixin Insight Group emphasized the importance of effective policy implementation to sustain economic recovery and improve market confidence.
Gold prices surged to over $2,310 per ounce on Monday, bouncing back from nearly a month-low last week. Traders are observing remarks from various Federal Reserve officials this week to estimate potential rate cuts, especially after disappointing US labor data for April. The data showed a slower job growth rate than expected, strengthening the likelihood of rate cuts later in the year. According to CME's FedWatch Tool, there's a 67% chance of a rate cut in September. Lower interest rates make holding gold more attractive since it doesn't yield interest. However, in India, demand for physical gold remained subdued last week despite price drops, as buyers are waiting for bigger price declines. Meanwhile, Chinese premiums dropped for the second consecutive week due to weak holiday demand.
On Monday, the dollar index stabilized above 105.00 as investors evaluated the Federal Reserve's monetary policy stance and awaited upcoming central bank statements. Last week, the index declined approximately 1% after the Fed kept interest rates unchanged, and Chair Powell reiterated the central bank's inclination towards easing despite inflation concerns. Additionally, April's job data revealed a lower-than-expected increase of 175,000 jobs, further supporting market expectations of rate cuts, with a November cut fully anticipated. The dollar also faced pressure from the yen's strong rally last week, amid suspicions that the Bank of Japan intervened heavily to bolster its currency, spending over 9 trillion yen in the process.
The Japanese yen weakened towards 154.00 per dollar, retracting some of its gains from last week due to a public holiday, though concerns about government intervention persist. Last week, the currency surged by up to 5.2% on suspicions of intervention, with Bank of Japan data indicating significant spending to support it. Analysts suggest this intervention only offers temporary respite as underlying market conditions remain unfavorable for the yen. The yen has faced downward pressure this year as the Bank of Japan maintains ultra-low interest rates despite higher rates abroad, prompting investors to borrow yen for investment in higher-yielding currencies. However, expectations of two rate cuts by the US Federal Reserve this year may ease pressure on the yen.
In April 2024, the Caixin China General Composite PMI rose slightly to 52.8 from 52.7 in March, marking the highest level since May 2023. This indicates the sixth straight month of growth in private sector activity, driven by strong performance in both manufacturing and services. New orders increased notably, but employment levels declined for the third consecutive month. Input and output prices remained low, mainly due to subdued manufacturing factory gate prices. Overall, sentiment remained steady. Dr. Wang Zhe of Caixin Insight Group emphasized the importance of effective policy implementation to sustain economic recovery and improve market confidence.
