Gold prices fall but remain near record highs as market eyes key US economic data

Gold prices are currently in the red as the market focuses on the release of a host of economic data from the US this week. 

Even though prices have fallen today, the precious metal is still near its record highs touched last week. 

On COMEX, the most active December gold contract was 0.3% down at $2,660 per ounce.

On Friday, the contract had hit a lifetime high of $2,696.90 per ounce on rising demand for safe-haven assets. 

James Hyerczyk, an analyst with FXEmpire.com said in a report:

While gold has softened slightly in recent sessions, the market still leans bullish in the short term, especially if upcoming U.S. labor data reinforces expectations of additional rate cuts. 

Gold market to focus on key economic indicators

A host of economic data releases is lined up for the rest of this week from the US, which is likely to influence the gold market. 

The US is scheduled to release manufacturing purchasing managers’ index, unemployment rate, non-farm payroll data and change in the number of employed people during September later in the week.

On top of this, several officials from the US Federal Reserve are also scheduled to speak at conferences throughout the week. 

The gold market is likely to take cues from all of the above.

Analysts believe that if the economic data from the US indicates further deceleration of the inflation rate in the country, gold prices could continue their climb north. 

Carsten Fritsch, commodity analyst at Commerzbank AG said in a report.”

The price could also rise because investors are buying gold in anticipation of a further price increase.

Gold price outlook

Hyerczyk believes that gold prices on COMEX could rise to a new record high and hit the $2,700-per-ounce mark if economic data supports a dovish Fed. 

Analysts said the market will be expecting a 75 basis points interest rate cut by the US Fed by the end of the year.

The US Fed cut interest rates for the first time in four and a half years by 50 basis points a couple of weeks ago. 

The Fed’s decision signaled a shift towards easing monetary policy. Gold prices benefit from lower interest rates as the yellow metal is a non-yielding asset. 

On the downside, Hyerczyk said gold prices could slip below $2,600 per ounce if there is sustained pressure below the $2,616.50-per-ounce level. 

Geopolitical tensions add support to gold

Over the weekend,  Israel launched airstrikes against Houthi militias in Yemen and Hezbollah targets in Lebanon, further escalating tensions in the region. 

Investors will keep a keen eye on the geopolitical situation in the Middle East as gold tends to benefit as a safe-haven asset during times of turmoil. 

Hyerczyk said:

“Traders should remain alert to key economic reports and geopolitical developments, as these could drive volatility in gold prices.”