• Gold price is plunging during the week by almost 2.50%.
• The US Dollar Index rises to 2-decade highs, 109.977, underpinned by higher US Treasury yields.
• Robust US data justifies a super-size 75 bps rate hike by the Fed.

Gold price drops sharply to two-month lows, under the $1700 figure, after upbeat US economic data justifies the Federal Reserve’s intentions to hike rates 75 bps in the September meeting. At the time of writing, the XAU/USD fluctuates around the $1688-$1690s area, below its opening price.

Global equities remain under pressure while the US dollar rises to 20-year highs, per the US Dollar Index. Positive US economic data, led by S&P Global and ISM Manufacturing PMIs for August, reinforced what Fed officials expressed: the US economy remained strong. The Institute for Supply Management (ISM) reported that the PMI was unchanged at 52.8, above 51.9 expectations. Meanwhile, the S&P Global PMI was at 51.5, above forecasts and the previous reading of 51.3.

Earlier, the US Department of Labor revealed that unemployment claims for the week that ended on August 27 increased by 232K, less than the 248K estimated.

Gold traders should be aware that US employment data released during the week support the idea of the Fed going for a 75 bps rate hike for the third straight meeting. JOLTs data, reporting 11 million vacancies, unemployment claims dropping, and US ISM manufacturing PMI comments about hiring increments the Fed’s soft landing possibilities.

Elsewhere, the US Dollar Index, a gauge of the buck’s value against a basket of peers, climbs 0.94%, refreshing 2-decade highs at 109.716, underpinned by high US T-bond yields. Also, a headwind for the yellow metal is the US 10-year Treasury Inflation-Protected Securities (TIPS), a proxy for real yields, which is rising eight bps, to 0.796%, after hitting a daily high at 0.823%.

What to watch

The US economic docket will feature the US Nonfarm Payrolls for August on Friday. Economists predict that the economy will add 298K jobs, and the Unemployment Rate will remain at 3.5%.

Gold Key Technical Levels