Ella 
Gold prices extended gains for the second consecutive day, rising to around $1,920 an ounce during Asian trading on Friday. After three consecutive days of gains, the U.S. dollar retreated, which may be related to a pullback in U.S. Treasury yields. The 10-year U.S. Treasury yield fell to 4.22%, down 1.36% in two days.
The U.S. dollar index (DXY), which measures the greenback’s performance against six other major currencies, traded around 104.90, struggling to hit its highest level since April. The index continued to be impacted by a string of positive data on the state of the U.S. economy.
The data released by the United States on Thursday showed that as of September 1, the number of people filing for unemployment benefits in the United States was 216,000, lower than the previous value of 229,000, and the expected value was 234,000. US unit labor costs (Q2) rose to 2.2% from 1.6% in the previous reading, in line with expectations.
The dollar’s recent strength appears to come from growing investor confidence in a more hawkish Fed. Market participants appear to believe the Fed is likely to raise interest rates by 25 basis points (bps) at its November and December meetings, and that the Fed is likely to keep interest rates higher for an extended period. This scenario has the potential to halt the upward trajectory of gold prices.
Investor confidence remained constrained by ongoing concerns over deteriorating economic conditions in China and ongoing trade tensions between the U.S. and China. These factors, combined with risks related to China’s economic health and trade relations, are likely to dampen demand for gold prices.
However, it is worth noting that China has recently implemented a series of policy measures aimed at reviving its troubled economy, especially after economic growth fell rapidly during the epidemic. In addition, more policy measures are expected to be rolled out in China in the near future.
In addition, the G20 leaders summit will be held in New Delhi this Saturday. Notably, US President Joe Biden will attend the meeting, while Chinese President Xi Jinping will not, further exacerbating the already delicate and deteriorating relationship between the two superpowers.
Traders are likely to focus on upcoming speeches from Fed members later in the day when no major economic data is released.
