Precious Metals Face Headwinds from Stronger Dollar

Gold prices declined as rising expectations for a Federal Reserve rate hike and geopolitical tensions in the Middle East supported the US Dollar. Silver prices traded in a narrow range, with market participants awaiting key US economic data releases, including the ISM Manufacturing PMI and JOLTS Job Openings reports, for further direction.

Asian Manufacturing Activity Shows Signs of Improvement

Factory activity in Asia expanded in August, driven by a global boom in artificial intelligence and improving demand in China, which reported a better-than-expected manufacturing PMI. This trend was further highlighted by South Korea's proposal for a record budget to invest in its AI sector, while the positive Chinese data offered support to the Australian Dollar.

Hawkish Fed Outlook and Rising Oil Prices Influence Markets

A hawkish outlook from the Federal Reserve, combined with ongoing geopolitical risks in the Middle East, put upward pressure on the US Dollar against currencies like the British Pound. These same geopolitical concerns contributed to a rise in oil prices, with WTI crude crossing $91 a barrel at one point, creating conflicting pressures for commodity-linked currencies like the Canadian Dollar.

Focus Remains on Japanese Yen and Central Bank Policy

The Japanese Yen continued to trade near the 160 level against the dollar, weighed down by the significant interest rate gap between Japan and the US. Japanese officials reiterated the need for coordinated action with the US to address foreign exchange movements, while also stating an expectation that the Bank of Japan will steer its policy based on domestic economic conditions.