Gold Rebounds to $2,410 on Weaker Dollar; Australian Dollar Hits Three-Week Low
Gold climbed to around $2,410 per ounce on Monday, driven by a technical rebound after a nearly 2% decline in the previous session and bolstered by a weaker dollar. Last week, the precious metal faced downward pressure as the dollar strengthened on powerful manufacturing growth in the US Mid-Atlantic region in July, while an increase in weekly jobless claims was attributed to seasonal factors. Key indicators include the Q2 advance estimate for GDP growth, personal spending, income, and the June PCE price index. After President Joe Biden ended his reelection campaign, eyes turned to Vice President Kamala Harris.
The Australian dollar fell below $0.668, hitting its lowest level in three weeks as plummeting energy and metals prices put pressure on the currency. Given Australia’s heavy reliance on commodity exports, movements in commodity prices significantly impact the currency. The currency also faced downward pressure from a rebounding US dollar, despite ongoing expectations for potential rate cuts by the Federal Reserve. In contrast, the Australian dollar had outperformed its counterparts in early July on speculation that the central bank might raise rates again in August following a strong inflation report for May. June witnessed strong job additions in Australia, signaling tight labor market conditions, although the unemployment rate ticked up slightly to 4.1% from 4%. Currently, markets are pricing in approximately a 20% probability of a rate hike by the central bank in August.
On Monday, the dollar index stabilized around 104.4, strengthened by news of President Joe Biden's decision to withdraw from the reelection race and endorse Vice President Kamala Harris as the Democratic nominee. Analysts indicated that Biden's exit is expected to have minimal impact on markets, with former President Donald Trump remaining the frontrunner for November's election. Last week, the dollar edged higher supported by robust US economic data. Despite this, the index has declined approximately 1.5% thus far in July, driven by easing inflation expectations reinforcing anticipations for a Federal Reserve interest rate cut in September. Speculation also persists about further cuts before year-end.