Gold price faces pressure despite soft US PCE inflation, US Manufacturing PMI eyed

• Gold price refreshes six-month low near $1,840.00 as US Treasury yields extend upside.
• A soft US core PCE report has trimmed consumer inflation expectations.
• Fed’s Williams sees interest rates near their peak as the labor market imbalance declines.

Gold price (XAU/USD) continues its losing spell despite the fact that Friday’s soft core Personal Consumption Expenditures (PCE) inflation vanishes odds of a hawkish interest rate decision from the Federal Reserve (Fed) in the November monetary policy meeting. The precious metal struggles for a firm footing as Treasury yields continue their bullish run as the Fed is expected to stick to the ‘higher for longer’ stance in interest rates.

The US Dollar struggles to recapture the 11-month high near 106.80 as investors turn cautious ahead of the US Institute for Supply Management (ISM) Manufacturing PMI data for September, which will be published at 14:00 GMT. US factory activity has been contracting for the last 10 months and a continuation in the contracting spell is widely anticipated.

Daily Digest Market Movers: Gold price extends downside despite soft US PCE report

• Gold price continues a five-day losing spell to near $1,840.00 in the context of ‘higher for longer’ interest rates by the Federal Reserve to tame the so-called ‘last leg’ of inflation.
• The precious metal also faces pressure from higher US Treasury yields, which have jumped to near 4.63% as Fed policymakers still favor more interest rates to ensure price stability.
• New York Fed Bank President John C. Williams said on the weekend that the Fed is at or near peak levels of interest rates. Williams sees signs of inflation pressures waning and labor market imbalance diminishing.
• The yellow metal failed to find bids on Friday despite a soft PCE report, which is majorly used by the Fed for policy decision-making.
• Monthly Core PCE grew at a nominal pace of 0.1%, slower than expectations and the former pace of 0.2%. The annual core PCE data decelerated to 3.9% as expected against July's reading of 4.3%. The headline PCE expanded at a higher pace of 0.4% against July's reading of 0.2% but slower than expectations of 0.5%. On an annual basis, PCE inflation accelerated to 3.5% as expected due to rising energy prices.
• A soft core PCE inflation report has decreased the chances of one more interest rate hike from the Fed before the year ends. As per the CME Group Fedwatch tool, investors price in that interest rates will remain steady at 5.25%-5.50% at the November monetary policy. Meanwhile, chances for interest rates remaining unchanged at 5.25%-5.50% until the end of 2023 dropped to 56%.
• A slowdown in consumer spending on core goods has eased consumer inflation expectations, making Fed policymakers comfortable in holding interest rates.
• On a broader note, the US economy is resilient due to a stable labor demand, upbeat wage growth, and robust retail demand, which would keep hopes for a rebound in inflation intact and Gold price on the back foot.
• While the US economy is performing well on grounds of the labor market and retail demand, the country’s manufacturing sector is still struggling, according to PMI data..
• As per the estimates, the US Manufacturing PMI is seen improving to 47.7 from August’s reading of 47.6, below the 50.0 threshold which signals a contraction in activity. This would be the 11th month of contraction in a row.
• The market mood improves as the US government manages to ditch a government shutdown in a last-minute deal. The agreement between the US House and Senate approved a funding bill until November 17.
• China’s new home prices rose slightly after declining for four months as home-builders ramped up property selling, capitalizing on supportive measures from China’s government and expansionary monetary policy by the People’s Bank of China (PBoC).
• Improved market sentiment is restricting recovery in the US Dollar index (DXY). The USD Index aims to stabilize above the 106.00 resistance as global slowdown fears persist.

Technical Analysis: Gold price eyes more downside to near $1,800

Gold price weakens after a bearish crossover by the 20-day and 200-day Exponential Moving Averages (EMAs). The precious metal sticks to the fresh six-month low near $1,840.00 and is expected to extend its downside journey towards the crucial support at $1,800.00. Momentum oscillators shift into a bearish trajectory, warranting more downside.