Gold lacks bullish momentum
Gold (XAU) fell on Friday, giving up initial gains made due to weakening.
Economic data indicating a slowdown in the US economy pushed the US dollar to its lowest point in almost a month as chances of additional rate hikes by the Federal Reserve diminished. ‘Data indicating some weakness in the labor markets helped drive market expectations around the Federal Reserve and therefore drove gold higher today. “This comes after a reduction in some of the risk-off flows that have occurred as concerns about a broader conflict in the Middle East have eased,” said Christopher Louney, commodities strategist at RBC Capital Markets. .
Today, XAU/USD declined in the Asian session but rose in the early hours of the European session. The People’s Bank of China kept its one- and five-year prime lending rates unchanged at 3.45% and 4.2%, in line with market expectations. “Spot gold looks neutral in a range of $1,976 to $1,990 per ounce, and a breakout could suggest direction,” said Reuters analyst Wang Tao.
Japanese yen benefited from US dollar weakness
The dollar rose over 149,000, reaching its highest level in more than five weeks, boosted by overall weakness in the US dollar. Now, the market does not expect rate hikes from the Federal Reserve. Expectations leaned towards more dovish policy from the regulator, so investors believe rate cuts will occur in May 2024.
Recent data revealed that Japan’s economy contracted more rapidly than expected in the third quarter as global demand declined and domestic inflation rose. The Bank of Japan (BOJ) reiterated its dedication to continuing its current loose monetary policy, implementing only minor modifications to its yield curve control measures. The BOJ adjusted its approach to Japanese government bonds, designating 1% as a flexible “upper limit” rather than a hard limit. The regulator also said it would not defend this level through unlimited bond purchases.
USD/JPY declined during the Asian session, but rose in the early hours of European trading. Today, the formal macroeconomic calendar is uneventful for the pair. This week, investors will focus on the upcoming preliminary manufacturing and services PMI figures and inflation data from Japan, which will provide insight into the country’s economic health and possible changes in monetary policy.