Gold Prices Tugged by the US Dollar, Analyst: Could Trade Between US$4,882 and US$5,244

JAKARTA, KOMPAS.com - Global gold price movements are potentially facing short-term pressure as the US dollar strengthens, after ISM Manufacturing PMI data beat market expectations. Investment Specialist PT Korea Investment and Sekuritas Indonesia (KISI), Azharys Hardian, said the ISM Manufacturing PMI stood at 52.4, indicating the US manufacturing sector is still in expansion as it sits above the 50 threshold. However, market attention was mainly on the jump in the prices subindex, which surged to 70.5. This figure is regarded as a warning sign for inflation. Historically, there is a fairly strong positive correlation between the ISM Prices Paid index and inflation as reflected in the Consumer Price Index (CPI), with a lag of around two to three months. The rise in the price index to 70.5 suggests producer inflation remains very high. This situation has markets re-pricing expectations for Federal Reserve policy rate cuts, as inflation remains ‘hot’. The narrative of ‘higher for longer’—that is, rates staying high for longer—gains traction. The expectation is that yields on US government bonds, particularly Treasuries, will rise. Theoretically, this is negative for gold because the opportunity cost of holding non-yielding assets such as gold increases. As yields rise, some investors move their money to yield-bearing instruments. ‘The market will re-price the probability of Fed rate cuts,’ the analyst noted. The ‘Higher for Longer’ narrative pushes Treasury yields higher, which is negative sentiment for gold.