- The dollar was heading for its longest weekly winning streak in nine years.
- Data revealed a stronger US services sector in August.
- The number of Americans filing for unemployment claims dropped to 216,000 last week.
Gold prices fell as US data strengthened, overshadowing the Fed’s expected pause. Brian Lan from Singapore dealer GoldSilver Central mentioned, “Market participants seek higher returns, and currently, the dollar appears attractive.”
The dollar was heading for its longest weekly winning streak in nine years thanks to robust US economic data. This week’s data revealed a stronger US services sector in August and unexpectedly low jobless claims, indicating a tight job market.
US jobless claims (Labor Department)
A US Labor Department report revealed that the number of Americans filing for unemployment claims dropped to 216,000 in the week ending on September 2, marking the lowest level since February. However, investors grew concerned that this decline could lead the Federal Reserve to continue its tight monetary policy.
A different report indicated that worker productivity in the second quarter wasn’t as robust as initially stated but still maintained a strong performance.
Nonfarm productivity, which gauges hourly output per worker, exhibited a 3.5% annualized growth rate from April to June, marking the highest level since the third quarter of 2020.
As indicated by the CME FedWatch tool, market pricing suggests a slightly over 40% likelihood that the Federal Reserve will implement another rate hike in November. However, the prevailing expectations are for policymakers to maintain interest rates at their current levels later this month.
Higher interest rates increase returns on competing safe-haven Treasury bonds, poised for their first weekly gain in three weeks. This makes non-interest-bearing gold less appealing.
Three Fed officials suggested on Thursday that the Fed might skip a rate hike in September but emphasized the need to address inflation further.
Additionally, sentiment regarding the world’s largest gold consumer soured due to data indicating a decline in China’s exports and imports in August. China’s exports and imports continued their descent in August, primarily due to the dual pressures of weakening foreign demand and subdued consumer spending within its borders.
While these trade figures align with other indicators hinting at a potential stabilization in China’s economic downturn, they still fall well short of the growth anticipated by economists earlier this year when the government relaxed its strict COVID restrictions.
