Gold Update: XAU/USD Eyes U.S. Economic Data for Guidance
Gold Update: XAU/USD Eyes US Economic Data For Guidance
Gold prices have been on the rise in recent weeks as hopes of a slower rate hike from the Fed are giving the yellow metal further support. A weaker dollar and fears of a global recession also make gold more attractive to investors holding other currencies.
Today, economic data will be released from the United States which could provide further guidance on the future stance of monetary policy by the Federal Reserve. Inflation numbers will be key to this decision and a downside surprise may prompt the Fed to lower its hawkish stance.
Economic Data Releases
The US government releases a large number of economic data each month. These can have an impact on foreign exchange markets and traders need to stay up-to-date with them.
One of the most widely followed and closely watched reports is the manufacturing sector report. This indicator has a lot of power behind it as it reflects changes in output, which can be used to gauge the health of the economy and whether there will be a turning point soon.
Another indicator that forex traders are likely to pay close attention to is the consumer confidence index. It comes out toward the end of the month and tends to reflect consumer optimism or pessimism about their future.
Retail sales are also an important indicator of the state of the economy. If the report shows an increase, it is an indication that economic health is improving, which tends to have a positive effect on the Forex market.
US Inflation Numbers
The US inflation numbers are a key indicator of economic trends. The Fed sets a target for inflation to reach 2%.
A key metric is the consumer price index (CPI). This measure measures the change in prices for all goods and services in the country.
Inflation is a major concern for many Americans, who have seen their paychecks shrink while the cost of everyday items has soared. The CPI has risen to its highest level since 1982, and the Fed has been aggressively hiking interest rates to try to get inflation under control.
On Friday, the US Bureau of Labor Statistics (BLS) reported that inflation excluding food and energy rose 0.3% in December from November. Shelter was the “dominant” factor, reflecting the rising cost of living for households.
US Interest Rates
Gold is sensitive to interest rates, and any hints in the Fed minutes of an impending hike could send prices lower. Fortunately, there are several key economic releases out this week that could provide guidance for the yellow metal.
Aside from the CPI release on Thursday, retail sales data is also likely to have an impact. A stronger-than-expected print would further shift FOMC rate hike bets to the left, and potentially give gold some much-needed support.
Moreover, the Personal Consumption Expenditures Price Index (PCE) report for August is expected to cross the wires later this week on September 30. A hotter-than-expected print could revive aggressive rate hike bets, sending the dollar and Treasury yields higher.
Economic instability is a stage in the economy when it is experiencing a recession or an unhealthy expansion associated with an increase in the price level. During such periods, businesses and individuals can suffer significantly.
Similarly, business confidence can drop which results in lower investment and spending. Therefore, it is important that the government should focus on ensuring stability in the economy.
One way that the government can reduce economic instability is by providing jobs to people and reducing unemployment levels. Another method is by lowering taxes to encourage business to hire more workers.
A third way to improve economic stability is by focusing on labor standards such as paid sick leave. This can help employers stabilize their employees’ income and make them more reliable. Moreover, social insurance schemes can also provide a way to stabilize earnings.