Commodity Market: Gold retreats as upbeat US manufacturing data triggers a rebound in US Dollar from 28-month lows

Following three straight trading days of gains, Gold retreated on Wednesday as the US Dollar regained ground after upbeat US manufacturing data added to investor optimism over economic recovery.

The US Dollar rebounded from lows unseen since April 30th 2018 against six major peers, after the latest report by the Institute for Supply Management showed US manufacturing activity had expanded at the sharpest rate since November 2018 in August. The report followed robust manufacturing data from China and Europe.

A stronger US Dollar makes Gold more expensive for international investors holding other currencies.

“A stronger greenback is weighing on the precious metal,” Margaret Yang, a market strategist at DailyFx, said.

“The broader picture is still in favor of gold, as the U.S. Federal Reserve and other central banks are likely to stay accommodative for an extended period of time.”

Federal Reserve Governor Lael Brainard said yesterday that the central bank would have to introduce additional stimulus in order to achieve its new objective of stronger employment growth and higher inflation rate.

As of 9:21 GMT on Wednesday Spot Gold was inching up 0.01% to trade at $1,970.69 per troy ounce, while moving within a daily range of $1,956.16-$1,973.33. The precious metal lost 0.42% in August, following four consecutive months of gains.

Meanwhile, Gold futures for delivery in December were inching down 0.05% on the day to trade at $1,977.95 per troy ounce, while Silver futures for delivery in December were down 1.41% to trade at $28.240 per troy ounce.

The US Dollar Index, which reflects the relative strength of the greenback against a basket of six other major currencies, was edging up 0.29% on Wednesday to 92.58, rebounding from yesterday’s 28-month low of 91.75.

In terms of macro data, today Gold traders will be expecting the latest report by Automatic Data Processing Inc at 12:15 GMT, which may show employers in the US non-farm private sector hired 900,000 employees in August, according to market expectations.

There is also plenty of Fed speak on today’s calendar. At 14:00 GMT Federal Reserve President for New York John Williams is to take part in a conversation titled “New York Fed Presidents on COVID-19”, hosted by the Bretton Woods Committee.

At 16:00 GMT Federal Reserve President for Cleveland Loretta Mester is expected to speak on the US economic outlook and monetary policy before the 17th Annual NABE Foundation Economic Measurement Seminar via webcast.

And at 18:00 GMT Fed President for Minneapolis Neel Kashkari is to take part in a virtual panel with a topic “Where are the Black Financial Regulators?”, hosted by the Brookings Institution.

Meanwhile, near-term investor interest rate expectations were without change. According to CME’s FedWatch Tool, as of September 2nd, investors saw a 100.0% chance of the Federal Reserve keeping borrowing costs at the current 0%-0.25% level at its policy meeting on September 15th-16th, or unchanged compared to September 1st.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – $1,975.47
R1 – $1,987.58
R2 – $2,004.68
R3 – $2,016.79
R4 – $2,028.91

S1 – $1,958.37
S2 – $1,946.26
S3 – $1,929.16
S4 – $1,912.06