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Gold price capitalises on weak US data, Fed policy hogs limelight

Gold price (XAU/USD) recovered losses and turned positive on Wednesday after a two-day losing spell on weaker-than-anticipated United States Automatic Data Processing (ADP) and the Institute of Supply Management (ISM) Manufacturing PMI data for October. The US ADP reported that employers hired 113K job seekers, which were lower than expectations of 159K but significantly higher than the former reading of 89K. Meanwhile, job openings rose significantly in September, as reported by the US Bureau of Labor Statistics (BLS). The agency reported that the number of job openings on the last business day of September stood at 9.55 million against 9.49 million (revised from 9.61 million) openings in August and market expectations of 9.25 million.

The ISM reported the Manufacturing PMI at 46.7, lower than expectations and the former reading of 49.0. The factory data remained below the 50.0 threshold for the 12th month in a row as business investment fell sharply due to higher borrowing costs. New factory orders also dropped significantly to 45.5 from September’s reading of 49.2. The US Dollar Index has faced selling pressure near 107.00 after the release of the downbeat US economic data.

The precious metal would show a decisive move after the interest rate decision by the Federal Reserve (Fed). The precious metal fell sharply in the last two trading sessions even though markets widely expect that the Fed will keep interest rates unchanged in the 5.25%-5.50% range. However, a hawkish interest rate outlook is highly anticipated as robust spending by households and strong labor market conditions keep upside inflation risks alive.

Fed Chair Jerome Powell and his colleagues may keep the likelihood of further policy tightening on the table as the progress in inflation easing toward the 2% target has slowed due to strong wage growth. US households having high purchasing power are spending heavily, keeping the core Personal Consumption Expenditure (PCE) price index relatively stubborn.

Read more: Fxstreet