Gold (XAU/USD) is consolidating below the $2,000 psychological level during Monday’s early Asian session. The correction in the US dollar (USD) and a pullback in US Treasury yields are providing some support to the yellow metal. Gold is currently trading around $1,996, up 0.07% on the day.
Meanwhile, the US Dollar Index (DXY), which measures the value of the greenback against a basket of global currencies, falls to 106.20 after retreating from a weekly high of 106.70. US Treasury yields are moving a little, with the 10-year Treasury yield hovering around 4.90%.
Last week, Federal Reserve (Fed) Chairman Jerome Powell reiterated that the Fed will keep interest rates on hold at its upcoming meeting on Wednesday, but whether it will keep rates on hold in December will depend on incoming data. Powell added that an additional rate hike is possible if economic growth remains strong and labour shortages persist. This, in turn, could limit the upside for gold. It’s worth noting that rising interest rates increase the opportunity cost of investing in non-yielding assets, implying a negative outlook for precious metals.
Elsewhere, investors will be watching China’s PMI data on Tuesday. China’s manufacturing PMI is expected to remain in expansionary territory, rising to 50.2, while the non-manufacturing PMI is expected to rise to 51.8. The stronger-than-expected data could boost gold as China is the world’s largest producer and consumer of gold.
Looking ahead, the US Housing Price Index and Consumer Confidence are due on Tuesday. Attention will shift to the Fed’s interest rate decision and the press conference on Wednesday will be closely watched. Traders will be looking to these events to find trading opportunities in the USD/JPY pair.
