Gold buyers take a breather ahead of key data

Gold prices gradually reverse Wednesday’s decline from an all-time high as traders prepare for October’s preliminary PMIs from major economies. The previous day saw gold experience its biggest daily loss in 11 weeks, driven by expectations of slower rate cuts from the US Federal Reserve and concerns about China's economic transition.

US Dollar strength challenges gold buyers amid weak sentiment

On Wednesday, statements from policymakers at the European Central Bank (ECB), Bank of England (BoE), Bank of Canada (BoC), and the US Federal Reserve (Fed) created uncertainty about future rate decisions. While officials from the ECB, BoE, and BoC seem more inclined toward significant rate cuts, Fed officials continue to uphold a hawkish stance, bolstered by recent US data. Concerns are also growing that China may face a Japan-style lost decade, adding pressure on market sentiment and strengthening the US Dollar. Consequently, gold buyers are pausing as the US Dollar Index (DXY) holds firm at its highest level in nearly three months.

EURUSD, GBPUSD bears dominate, USDJPY grinds higher

Comments from ECB President Christine Lagarde and Chief Economist Philip Lane, along with a Reuters report from multiple sources, indicate that further rate cuts are on the horizon for the central bank. This outlook reflects ongoing economic sluggishness in the region, putting pressure on Euro prices. Consequently, EURUSD fell to its lowest level since early July before recovering slightly and breaking a three-day losing streak early Thursday.

Similarly, BoE Governor Andrew Bailey said Wednesday that disinflation has taken place faster than expected in the UK and elsewhere but failed to defend the GBPUSD buyers amid a seven-month fall in the British car output. It’s worth noting that the market is 95% priced for a 25 bps BoE rate cut in November and 75% priced for another rate reduction in December. With this, the GBPUSD licks its wounds at an 11-week low.

Moving on, Bank of Japan (BoJ) Governor Kazuo Ueda stated on Wednesday that achieving a sustainable 2% inflation is still a challenge. His remarks indicate hurdles for further rate hikes, supporting USDJPY prices. Similarly, the October flash PMIs showed a sharper contraction in manufacturing and services compared to the previous month. However, remarks from Japan’s Deputy Chief Cabinet Secretary Kazuhiko Aoki and Finance Minister Katsunobu Kato indicate that policymakers are ready to defend the Yen, posing challenges for buyers recently.

Antipodeans stay pressured, Crude Oil recovery stalls

Similar to major currencies, the Australian, New Zealand, and Canadian Dollars are also falling against the US Dollar, influenced by concerns linked to China’s economy. The AUDUSD, NZDUSD, and USDCAD reflect the negative PMI data and the Bank of Canada’s rate cut, despite a slight recovery in oil prices.

Crude oil prices, after stalling a two-day uptrend, retreated from a one-week high due to a higher-than-expected increase in US crude oil inventories. However, the market’s consolidation has allowed oil to recover some losses early Thursday.

Gold fluctuates near record high

Despite the US Dollar's strength and concerns over China and the Middle East challenging gold buyers, the precious metal remains resilient near its all-time high reached the previous day. The ongoing market uncertainty is driving traders toward this traditional safe haven. Additionally, speculation that BRICS nations are considering a new currency backed by gold and silver is further supporting gold's ascent.

Cryptocurrencies pare recent losses

The US Dollar's strength isn't hindering Bitcoin (BTC/USD) and Ethereum (ETH/USD) buyers, who are experiencing a strong rebound early Thursday. This positive momentum is fueled by hopes for more favorable US SEC regulations following the presidential elections. Additionally, significant inflows into crypto ETFs boost confidence among Bitcoin and Ethereum investors.

Latest moves of key assets

• WTI Crude oil picks up bids to reverse the previous day’s pullback from the weekly high, mildly bid near $71.50 by the press time.
• Gold renews run up toward the all-time high by posting minor gains near $2,735 at the latest, after retreating the previous day.
• The USD Index prints the first daily loss in four as it prints mild losses near 104.30 as we write.
• Wall Street closed with mild losses but the Asia-Pacific shares drifted lower. Further, European and British equities trade mixed during the initial trading hour.
• BTCUSD and ETHUSD both pare weekly losses with mild intraday gains near $67,000 and $2,550 at the latest.

PMI, US Durable Goods Orders eyed

Looking ahead, Thursday will spotlight the first readings of October PMIs from the Eurozone, the UK, and the US, followed by Friday’s US Durable Goods Orders for September. A series of speeches from central bankers at the ECB, BoE, and Fed may also increase market volatility. Additionally, updates on China’s economic defense efforts and the ongoing Middle East conflict will keep traders engaged.

With the market adjusting its expectations for Fed rate cuts, the US Dollar is likely to benefit from the upcoming PMI and Durable Goods Orders data, barring any significant disappointments. Additionally, discussions around further rate cuts from other major central banks and rising geopolitical and trade war concerns could support the Dollar.

This potential strength may exert downward pressure on EURUSD, GBPUSD, AUDUSD, and NZDUSD, while USDJPY and USDCAD might remain resilient. However, gold could still attract buyers due to its safe-haven status, although crude oil recovery may face challenges.

Predictions for Key Assets

• Recovery Expected: USDCAD, USDJPY, US Dollar, Silver
• Further Downside Likely: AUDUSD, NZDUSD, GBPUSD
• Mostly Sideways Expectations: BTCUSD, ETHUSD, Nasdaq, Gold, DJI30, USDCNH
• Slow & Gradual Fall Expected: DAX, FTSE 100, EURUSD, Crude Oil

May the trading luck be with you!