Gold Lost 2% in a Day Due to Better-Than-Expected US Data
Yesterday, gold (XAU) fell towards 2,328, marking a two-week low. Overall, XAU/USD lost 2.10% over the day.
The main reason for the drop is that investors are increasingly doubtful about a rate cut by the US Federal Reserve (Fed) in September following the latest stronger-than-expected US economic releases. For example, yesterday's S&P Composite Purchasing Managers' Index (PMI) report showed that business activity was accelerating in May. Meanwhile, the number of Americans applying for unemployment benefits was lower than expected, indicating a stronger labour market. The strong economic data and discussion by some US officials about raising interest rates further strengthened the US dollar significantly.
According to the CME FedWatch tool, traders are now increasingly sceptical that the Fed will lower rates more than once in 2024. However, some remain optimistic about XAU/USD's outlook. FX Empire analyst Christopher Lewis says the precious metal market remains bullish even though the market has 'sold off gold rather drastically' in the last few days. 'The market continues to enjoy central bank buying with it coming out and supporting it,' he added. Investors still want to diversify their portfolios with precious metals, and Lewis says he doesn't see the trend changing in the short term.
"So gold should continue to appreciate in value," Lewis stated.
Gold rose today in the early Asian trading session. After yesterday's sharp drop, XAU/USD may correct upwards and rise towards 2,350. If the price breaks below the two-week low, it could fall further to 2,300. Two US reports could affect the gold price today: Durable Goods Orders at 12:30 p.m. UTC and Consumer Sentiment at 2:00 p.m. UTC. Better-than-expected numbers will further decrease chances for a rate cut by the Fed this year, putting downward pressure on precious metals. Otherwise, gold may continue its upward trend.
Euro Continues to Fall on Better-Than-Expected US Data
The euro (EUR) lost 0.07% during a rather volatile trading session on Thursday after better-than-expected US Purchasing Managers' Index (PMI) reports pushed the US dollar (USD) higher.
Although eurozone PMI figures were higher than expected, business activity in the manufacturing sector remained weak. Meanwhile, the US PMI numbers rose to the highest level in over two years in May. Manufacturers reported a surge in prices for a range of inputs, suggesting that inflation could pick up in the months ahead. The market immediately reacted by lowering the probability of an interest rate cut by the Federal Reserve (Fed) in September, strengthening the US dollar.
At the same time, the European Central Bank (ECB) is still widely expected to cut its base rate in June, meaning that the interest rate differential between the eurozone and the US will expand, further supporting the greenback. 'The currency action shows the market still responds to strong US economic data in the expected way. I think the US dollar has some more room on the upside. The market is still exaggerating the chances of two rate cuts this year,' said Marc Chandler, chief market strategist at Bannockburn Global Forex LLC.
EUR/USD was falling during the Asian and early European trading sessions. The pair has been declining for five consecutive days. Thus, the bullish trend, which started in mid-April, is now at risk of breaking. Today, more US data will be released. Traders should focus on two reports: the US Durable Goods Orders at 12:30 p.m. UTC and the Consumer Sentiment at 2:00 p.m. UTC. Higher-than-expected figures will weaken EUR/USD further, potentially pushing the exchange rate below the critically important 1.07950 level. Conversely, lower-than-expected results may pause the short-term bearish trend and trigger an upward correction, possibly above 1.08200.
Bitcoin Drops by 1.72% Amid Profit-Taking
Bitcoin (BTC) dropped by 1.72% on Thursday as the Securities and Exchange Commission (SEC) approved eight spot Ethereum exchange-traded-funds (ETFs).
Spot Ethereum ETFs received approval for their 19b-4 filings today, enabling them to be listed on their respective exchanges. However, applicants must first obtain approved S-1 registration statements before they can start trading. Bloomberg ETF analyst James Seyffart mentioned that S-1 approvals could come in a couple of weeks but also noted that the process could take longer, as it typically takes up to five months. The correction in BTC/USD was likely caused by profit-taking following the approval of the ETH ETF. This news had already been priced in earlier, and now participants are beginning to lock in their profits. The trigger for the correction was the release of better-than-expected US Purchasing Managers' Index (PMI) reports, which pushed the US dollar higher.
Moreover, Bitcoin mining difficulty has increased by nearly 2%, reaching over 84.4 trillion, as the network's average hash rate surged past 600 exa-hashes per second. Bitcoin mining difficulty indicates how challenging it is to find a hash below a specified target. This rise coincides with growing optimism in the crypto market, driven by speculation about the approval of spot Ethereum ETFs. Despite a minor 2% dip in BTC/USD over the last 24 hours, Bitcoin's price continues to be in a weekly uptrend.
BTC/USD fell during the early European trading session. A crypto analyst known as BitQuant shared insights on the social media platform X, predicting significant growth for Bitcoin. BitQuant expects Bitcoin to reach 95,000, with a notable increase to 80,000 anticipated in May. However, BitQuant also forecasts a sharp decline from this local peak in June.