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Gold’s moves come after a sharper-than-expected contraction in US manufacturing activity and an unexpectedly sharp rise in initial jobless claims to the highest level in more than a year, which in turn reinforces market hypothesis about multiple rate cuts this year.
The ISM manufacturing PMI hit its lowest reading this year at 46.8 in July and initial jobless claims rose last week to 249,000.
These figures, combined with yesterday’s Fed speech, have made markets almost certain of a cut in September and one or two possible cuts in November or December, according to the CME FedWatch Tool.
The rapidly escalating geopolitical tensions, with fears of a wider regional war in the Middle East, are also keeping gold on track to record further gains.
Headlines have been full of indications of a wider war and further escalation as hopes for a ceasefire in Gaza have waned. This came after the assassination of Hamas political leader Ismail Haniyeh in Iran and Hezbollah leader Fouad Shukr in Lebanon.
Meanwhile, the US and regional countries are seeking to contain the escalation and revive the fragile and faltering negotiating track for a ceasefire in Gaza before it is dragged into a wider war, according to The Wall Street Journal.
These assassinations may require a multi-front response from various countries in the region, which in turn may result in a counter-response that could ignite escalation in the region, potentially dragging the US along. In addition to all of this, this could encourage Iran to ramp up its nuclear program, according to The New York Times.
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