- Gold price drifts higher to around $4,230 in Tuesday’s early Asian session.
- Growing expectations for US monetary easing support the Gold price.
- Renewed US Dollar demand might cap the upside for XAU/USD.
Gold price (XAU/USD) extends the rally to near $4,230 during the early Asian trading hours on Tuesday. The precious metal edges higher to a near six-week high amid growing expectations of US interest rate cuts.
The US Manufacturing Purchasing Managers Index (PMI) contracted for the ninth straight month in November, the Institute for Supply Management (ISM) showed on Monday. The Manufacturing PMI declined to 48.2 in November, versus 48.7 prior, below the estimation of 48.6. Following softer US economic data, traders have increased December rate-cut bets to an 87% chance, according to the CME FedWatch tool. Lower interest rates could reduce the opportunity cost of holding Gold, supporting the non-yielding precious metal.
“The underlying environment of expectations of further rate cuts, along with inflationary pressure still above the Fed target… is still the underlying support in gold and silver,” said David Meger, director of metals trading at High Ridge Futures.
On the other hand, China’s physical Gold demand softens at high prices, which could drag the yellow metal price lower. The Financial Times reported that large retail chains have reduced their footprint in mainland China this year, while several small sellers said surging prices and a growing tax burden had torpedoed sales.
This week’s key US macro releases could drive the US dollar (USD) demand and influence the near-term trajectory for the Gold price in the near term. Traders will take more cues from the US ADP Employment Change and ISM Services PMI reports on Wednesday, ahead of the key Personal Consumption Expenditures (PCE) Price Index inflation data. If the data come in stronger than expected, this could boost the Greenback and weigh on the USD-denominated commodity price.
