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8 July 2024 | FXGT.com

China’s Pause on Gold Purchases and US Data Influence Gold Market

  • China’s Gold Reserves Remain Unchanged in June: Official data released on Sunday showed that the People’s Bank of China (PBoC) did not add to its gold reserves for the second consecutive month in June, keeping its holdings steady at 72.80 million troy ounces.
  • Gold Price Attracts Sellers Below $2,400: The new week started with a slight dip in gold prices due to profit-taking following Friday’s rally after the US Non-Farm Payroll (NFP) data release. The PBoC’s decision to pause its gold purchases for a second month in a row weighed heavily on prices, given China’s status as the world’s largest bullion consumer. However, expectations of a US Federal Reserve rate cut in the third quarter and political uncertainty in France could limit the downside for gold.
  • Impact of US Economic Data: Weaker-than-expected US economic data, including services and ADP employment reports, signalled a slowing economy. The US Nonfarm Payrolls rose by 206K in June, above the market expectation of 190K but less than the revised 218K in May. The unemployment rate ticked up to 4.1% in June from 4% in May, and average hourly earnings grew by 0.3% month-over-month, meeting expectations.
  • US Rate Cut Expectations: Following the latest economic data, the likelihood of a September rate cut by the US Federal Reserve has risen to 73% according to the CME FedWatch tool. The FOMC minutes also indicated easing price pressures, fuelling expectations of rate cuts, which could weaken the US Dollar and support gold prices.
  • Market Sentiment: The combination of potential Fed rate cuts and political developments in the UK and France is influencing current market sentiment. Political uncertainty in Europe, particularly in France, and geopolitical tensions in the Middle East are likely to boost safe-haven demand for precious metals.
  • Key Events to Watch: Traders will be closely watching Fed Chair Jerome Powell’s testimony on Tuesday and Wednesday for further cues on monetary policy. Additionally, the US June Consumer Price Index (CPI) inflation data, scheduled for release on Thursday, will be a significant indicator for market direction.
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