Gold Declines Due to Strong US Economic Data
Gold (XAU/USD) prices pulled back on Thursday following robust US macroeconomic data.
Gold slipped below $2,730 on Thursday, losing gains made during the Asian session. The strength of the US dollar (USD) and rising Treasury yields damaged the metal's safe-haven appeal. The greenback rose due to strong US economic data that increased speculation that the Federal Reserve's (Fed) upcoming rate cuts may be less aggressive than anticipated. Recent data revealed a significant drop in US unemployment claims in late October, underscoring the labour market's resilience, while an uptick in the S&P Purchasing Managers' Index (PMI) pointed to robust private sector growth.
Still, gold may receive support from other factors. With the US presidential election less than two weeks away, polls show a tightly contested race. Political uncertainty and escalating tensions in the Middle East will likely support demand for the safe-haven precious metal.
XAU/USD fell during the Asian trading hours. Today, traders should focus on the release of the US Durable Goods Orders report at 12:30 p.m. UTC. Lower-than-expected figures should positively impact XAU/USD, potentially pushing the price back above $2,740. However, the bearish trend in the pair may continue if the figures are better than expected.
"Spot gold may retrace into a range of $2,711 to $2,716 per ounce, driven by a wave C", said Reuters analyst Wang Tao.
Euro Strengthens, But the Rally Faces Challenges
The euro (EUR/USD) gained 0.43% against the US dollar (USD) on Thursday after a surprise jump in German business activity improved investors' sentiment.
Yesterday, S&P Global reported better-than-expected Purchasing Managers' Indices (PMIs), but the overall eurozone Composite PMI remained relatively unchanged.
"The survey is in line with a weak economic environment with slowing inflation thanks to softening demand. The PMI was slightly up thanks to an easing contraction in manufacturing, hardly something to cheer about since the manufacturing sector has been in contraction since late 2022," said Bert Colijn at ING.
Thus, it seems unlikely that yesterday's rally in EUR/USD can be sustained, and traders will likely continue to sell the rallies.
Furthermore, the US PMI figures and weekly jobless claims were also better than expected, indicating that the US economy remains resilient enough. On balance, yesterday's PMI data underlines the divergence in relative economic performance between the eurozone and the US, which is why investors expect the Federal Reserve (Fed) to pursue a tighter monetary policy than its European counterpart.
EUR/USD was relatively unchanged during the Asian and early European trading sessions. Today, the pair may experience more volatility as two important macroeconomic reports will provide more information about the relative strength of the European and the US economies. German Ifo Institute will release its regular Business Climate report at 8:00 a.m. UTC, while the US Census Bureau will publish its latest Durable Goods Orders data at 12:30 p.m. UTC. Arguably, the Ifo report will likely have a bigger impact on the euro as it carries more fresh data, while US Durable Goods Orders data is often regarded as a lagging indicator. The key levels to watch are support at 1.08000 and resistance at 1.08500.
Bitcoin Rebounds From the $65,250 Support Level
Bitcoin (BTC/USD) rebounded from the $65,250 level on Wednesday, climbing approximately 5% over the next two days.
On 23 October, the Pennsylvania House of Representatives approved HB-2381, a pro-crypto regulatory bill aimed at protecting self-custody and digital asset payments. The announcement came on 24 October, following a strong vote of 176 to 26. The bill must still pass through the Pennsylvania Senate and receive Governor Josh Shapiro's signature to become law. Drafted by the Satoshi Action Fund, a Bitcoin advocacy organization in Washington, DC, the legislation underscores that ‘support for Bitcoin transcends traditional party lines, appealing to voters who prioritize economic freedom, technological innovation, and digital privacy.
Bitcoin also provides a pathway to escape CBDCs, an issue that is top of mind to many voters’. Despite recent challenges posed by unfavorable US crypto policies, some industry leaders remain optimistic that regulations will shift in a positive direction with a potential new administration in the White House.
Head of EM FX Research, West and Crypto Research at Standard Chartered, Geoff Kendrick, predicts Bitcoin could reach $125,000 by year-end if Republicans take control of Congress after the 5 November elections. Kendrick expects BTC to hit around $73,000 by election day, with a Trump victory potentially pushing the price up 4% initially, followed by a further 10% rise. If Vice President Kamala Harris wins, BTC may dip temporarily but is expected to close the year around $75,000. Current polls suggest Trump has a 75% chance of victory.
BTC/USD corrected slightly during the Asian trading session. Crypto market traders and investors should prepare for volatility as $5.26 billion in Bitcoin and Ethereum options will expire today.