Gold price falls back as Greenback strengthens ahead of Manufacturing PMI

• Gold price comes under pressure amid weaker demand due to higher interest rates.
• Investors anticipate a power-pack action in Gold amid the release of the United States Manufacturing PMI for July.
• Fed Goolsbee favors more interest-rate hikes from Fed despite easing inflation.

Gold price (XAU/USD) faced immense selling pressure while attempting to sustain above the crucial resistance of $1,970.00 on Tuesday. The precious metal senses pressure as gold demand remained weak in the first half of 2023 due to higher gold prices and an aggressive rate-tightening cycle by the Federal Reserve (Fed). Apart from that, the immense strength of the Greenback builds severe pressure on bullion.

Investors anticipate a power-pack action in the Gold price amid the release of the United States Manufacturing PMI for July. The US factory sector has been consistently contracting for the past eight months and a similar result is expected again. After the hangover of US factory activities, investors will shift to labor market data, which will set an undertone for the Fed’s September monetary policy. For now, the chances of an interest rate hike from the Fed in its September policy are lower.

Daily Digest Market Movers: Gold price awaits factory activity data

• Gold price drops sharply after facing selling pressure around $1,970.00 as demand for gold remains weak due to higher gold prices and interest rates.
• Higher interest rates by central banks pushed households to elevate deposits to banks rather than investing in bullion. 
• Fears of more interest rate hikes from the Federal Reserve (Fed) deepen as Chicago Fed Bank President Austan Goolsbee favors further policy tightening despite easing inflationary pressures. 
• Minneapolis Fed Bank President Neel Kashkari remained positive that inflation is coming down positively but showed concerns about easing labor market conditions due to an aggressive policy-tightening cycle.
• The US Dollar Index continues its three-day winning spell and prints a fresh three-week high at 102.14 as a pause in the rate-tightening spell by the Fed is still out of sight.
• Meanwhile, 10-year US Treasury yields remain subdued around 3.96% as inflation remains in check after soft United States core Personal Consumption Expenditure (PCE) data was released on Friday.
• A power-pack action is expected in the US Dollar on Tuesday as the US Institute of Supply Management (ISM) agency will report July’s Manufacturing PMI data.
• Manufacturing PMI is seen higher at 46.5 vs. June’s figure of 46.0. In spite of higher factory activities, the Manufacturing sector is expected to remain in a contracting phase. Investors should note that a figure below 50.0 is considered contracting and this would be the ninth contraction print in a row.
• In addition to the Manufacturing PMI, investors will focus on Factory Orders which are expected to drop sharply to 44.0 against the previous month’s print of 45.6.
• Investors would get some meaningful cues about labor demand through JOLTS Job Openings data for June, which will be released at 14:00 GMT. As per expectations, Job Openings would drop to 9.62M against May’s release of 9.824M.
• This week, the US Dollar Index will remain active as the US economic calendar is full of economic events. After US Manufacturing PMI, investors will focus on Services PMI and labor market data.
• On Wednesday, Automatic Data Processing (ADP) will report Employment Change data for the US, which will be published at 12:15 GMT. As per the consensus, the US economy added a fresh 188K payrolls in July, significantly lower than novel employment additions of 497K made in June.
• Upbeat labor market conditions would make more interest-rate hikes from the Fed warranted.
• Fed survey data released on Monday showed that US banks reported tighter credit standards and weaker loan demand from both businesses and consumers during the second quarter, Reuters reported.

Technical Analysis: Gold price forms a Head and Shoulder pattern

Gold price trades inside Monday’s range as investors await crucial economic data for further action. The precious metal demonstrates a squeeze in volatility but will start expanding after economic events. The yellow metal is constantly trading sideways around the 20-day Exponential Moving Average (EMA) around $1,955.00.

On a smaller time frame, the Gold price is forming a Head and Shoulder chart pattern, which indicates that a bearish reversal is underway.