Gold trades in a tight range, edges lower after robust US services sector data

• Gold oscillates in a tight range after bets fade that the Fed will continue slashing interest rates aggressively.
• Support for Gold comes from increasing geopolitical risks and lower interest rates globally. 
• Technically, XAU/USD begins a leg lower within a tight range.  

As it continues to consolidate below the record high of $2,685 set last week, gold (XAU/USD) edges lower to trade in the $2,640s per troy ounce on Thursday. As the Federal Reserve (Fed) continues to aggressively reduce interest rates in the United States (US), sellers have the upper hand over purchasers. This, in turn, diminishes the appeal of non-interest-bearing assets such as gold.

The view that the US economy is functioning relatively well is substantiated by data released on Thursday, which follows a rise in Services sector activity in September.
According to data released by the Institute of Supply Management (ISM) on Thursday, the US ISM Services Purchasing Manager Index (PMI) increased from 51.5 in August to 54.9 in September, surpassing expectations of 51.7.

According to the data, the ISM Services Employment Index decreased to 48.1, which was lower than the previous month’s reading of 50.2.
In contrast, the ISM Prices Paid Index increased from 57.3 to 59.4, surpassing the anticipated value of 56.3

The data was released following the decline in S&P Global’s Composite PMI for the US from 54.2 to 54.0, which was consistent with the anticipated outcome. Additionally, S&P Services PMI decreased from 55.4 to 55.2, which was consistent with the anticipated outcome in September.
However, the downside of Gold is constrained by two critical factors: the fear of an escalation of the Middle East conflict and the general trend of lower global interest rates, which, despite the Federal Reserve’s recent caution, have resulted in safe-haven flows into Gold. This has allowed Gold to maintain its overall appeal to investors.

The Federal Reserve’s decision to reverse course has resulted in a halt to the upward movement of gold Gold’s potential for growth remains restricted by the unpredictable trajectory of interest rates in the United States. From a high of over 60% last week, the probability of the Federal Reserve reducing interest rates by another double-dose of 50 basis points (0.50%) in November has now decreased to a much less certain level of approximately mid-30%.

The decrease in market bets is a result of the publication of US jobs data that was stronger than anticipated, which indicates that the US economy is not on the brink of a cliff. This, in turn, has allowed the Dollar to resurface from its deep dive in August, thereby creating an additional challenge for Gold, which is primarily priced and traded in USD. The release of the Nonfarm Payrolls (NFP), the most significant US employment report, will be a critical determining factor in the US labor market’s health on Friday.