Gold recovering ahead of Fed Powell's speech, but then what?
Gold price is on the upswing for the fourth consecutive day, getting a boost as the US Dollar and Treasury yields take a step back. This is due to some recent data (PMI data) that got investors thinking about how strong the US economy really is.
The price of gold (XAU/USD) is looking strong as the US Dollar and Treasury yields are facing some downward pressure. This comes after S&P Global shared early PMI data for August that wasn't very impressive. The data showed that factories aren't as busy as expected and the service sector isn't growing as much as it should. This makes people worry about how well the US economy is doing. It also makes them hopeful that Jerome Powell, the head of the Federal Reserve (Fed), will say reassuring things at the Jackson Hole Symposium.
The first numbers for Manufacturing PMI this August were 47.0, lower than the predicted 49.3 and the July number of 49.0. The Services PMI also dropped to 51.0, while experts thought it would be 52.2 based on the previous 52.3. These not-so-good numbers tell us that the Fed's decision to control the money supply is impacting the economy.
Chris Williamson, who looks at business economics at S&P Global Market Intelligence, said: "Business activity almost came to a standstill in August. This makes us doubt that the US economy will grow much in the third quarter. The data shows that the growth that happened because of the service sector in the second quarter has slowed down, and factories are making less stuff."
The US central bank has been increasing interest rates a lot, aiming to bring down high prices. Inflation has gone down to 3.2%, but investors are worried about how the Fed will get to the 2% target they want.
Meanwhile, everyone is waiting to hear what Jerome Powell will say at the Jackson Hole Symposium. People expect Powell to say that interest rates need to stay high for a while to help the economy. Before, in a meeting in July, Powell said they might raise rates more if things kept looking good. If Powell says they might lower rates at the Jackson Hole event, it could make investors take more risks.
The interest rates for 10-year US Treasury bonds have gone down to 4.19% after the PMI data said the US economy might not be so strong. But James Bullard, who works at the St. Louis Fed, said the economy could grow even more, which might mean the Fed needs to raise rates more to fight inflation.
The price of gold (XAU/USD) is looking strong as the US Dollar and Treasury yields are facing some downward pressure. This comes after S&P Global shared early PMI data for August that wasn't very impressive. The data showed that factories aren't as busy as expected and the service sector isn't growing as much as it should. This makes people worry about how well the US economy is doing. It also makes them hopeful that Jerome Powell, the head of the Federal Reserve (Fed), will say reassuring things at the Jackson Hole Symposium.
The first numbers for Manufacturing PMI this August were 47.0, lower than the predicted 49.3 and the July number of 49.0. The Services PMI also dropped to 51.0, while experts thought it would be 52.2 based on the previous 52.3. These not-so-good numbers tell us that the Fed's decision to control the money supply is impacting the economy.
Chris Williamson, who looks at business economics at S&P Global Market Intelligence, said: "Business activity almost came to a standstill in August. This makes us doubt that the US economy will grow much in the third quarter. The data shows that the growth that happened because of the service sector in the second quarter has slowed down, and factories are making less stuff."
The US central bank has been increasing interest rates a lot, aiming to bring down high prices. Inflation has gone down to 3.2%, but investors are worried about how the Fed will get to the 2% target they want.
Meanwhile, everyone is waiting to hear what Jerome Powell will say at the Jackson Hole Symposium. People expect Powell to say that interest rates need to stay high for a while to help the economy. Before, in a meeting in July, Powell said they might raise rates more if things kept looking good. If Powell says they might lower rates at the Jackson Hole event, it could make investors take more risks.
The interest rates for 10-year US Treasury bonds have gone down to 4.19% after the PMI data said the US economy might not be so strong. But James Bullard, who works at the St. Louis Fed, said the economy could grow even more, which might mean the Fed needs to raise rates more to fight inflation.
