Does U.S. ISM manufacturing draw recession fears, all-out war in the Middle East on the horizon

U.S. recession worries warming, the market is expected the Federal Reserve will cut interest rates three times, coupled with the Middle East geopolitical risk heating up, stimulating safe-haven demand, are favorable to gold prices.

Gold prices yesterday in the United States after the release of ISM data, once rose more than 2450 U.S. dollars, followed by some retracement, the Asian plate continued to rise to 2460 near, as of press time, spot gold rose 0.73%, at 2463.96 U.S. dollars.

Recession worries heating, Fed rate cuts, or more urgent

The U.S. ISM manufacturing index and the week's initial jobless claims are pointing to the U.S. economy being at risk of recession, triggering market concerns, interest rate cuts or become more urgent, traders priced in the Fed to cut interest rates by 75 basis points during the year, the overall benefit of gold prices rose.

U.S. ISM Thursday (1 August) data show that the U.S. July ISM manufacturing PMI was 46.8, expected at 48.8, the previous value of 48.5.

The data hit an 8-month low, and has been located in the contraction range for four consecutive months; in addition, the same day the release of the July Markit manufacturing PMI also slipped into the contraction range, the two end of the previous backwardation trend, pointing to the United States manufacturing sector continued weakness, the release of economic slowdown signals.

Some analysts say the ISM employment report, which showed the worst data during the non-New Crown epidemic since 2009, and lower-than-expected new orders, will increase market bets on a rate cut.

Swap contract pricing shows that traders have fully digested the Fed's expectations of a combined 75 basis points of rate cuts during the year, which may mean that the Fed will cut rates by 25 basis points three times during the year.

On the same day, data from the US Department of Labor showed that US initial jobless claims reached 249,000 in the week ending 27 July, the highest level since 5 August 2023.

After the release of the data, the market's concern about the U.S. recession heated up, the dollar dived, U.S. Stocks fell sharply, and gold rose more than $2,450 at one point.

Middle East all-out war is about to detonate, and risk aversion heating up

The geopolitical conflict in the Middle East recently due to the Hamas leader Haniya after the attack suddenly escalated, risk aversion heating up, supporting the price of gold rose.

The latest news shows that Israel in the past 48 hours announced the elimination of three senior enemy generals, including Hezbollah senior commander Shukr, Hamas leader Haniya, and Hamas military department chief Dave.

In response, informed sources have revealed that Hamas has frozen negotiations on a ceasefire agreement indefinitely. The leader of Lebanon's Hezbollah, on the other hand, has said that the fighting with Israel has entered a new phase, in addition to which the Houthis have vowed to respond to Israel.

In addition, according to the latest U.S. intelligence, Iran will attack Israel in the next few days in a situation similar to that of 13 April but possibly on a larger scale. This may mean that the Middle East will set off another larger-scale war, which will stimulate safe-haven demand and favorable gold prices.

Technically, the fast and slow lines of the MACD indicator form a golden cross buy signal, in addition, the gold price runs between the upper rail line and the middle line of the Bollinger channel, suggesting that the price of gold will continue to rise. The key resistance level for gold to rise is 2480.