The ISM Manufacturing Purchasing Managers Index (PMI) fell to 54.6 in August from 55.6 in July, missing the market forecast of 55.2. The ISM Prices Paid Index held steady at 71.1, below expectations of 72.0, while JOLTS Job Openings rose to 7.271 million in July from 7.182 million but fell short of the 7.3 million forecast.

Despite the data misses, expectations that the Fed could raise interest rates as soon as this month keep the US Dollar and Treasury yields supported. The US Dollar Index (DXY) is trading around 99.64, up 0.23% on the day. Meanwhile, the benchmark 10-year US Treasury yield hovers around 4.76% after touching 4.80%, its highest level since January 2025.

A firmer US Dollar makes Dollar-denominated Gold more expensive for overseas buyers, while higher Treasury yields increase the opportunity cost of holding the non-yielding metal.

Chair Kevin Warsh’s tough rhetoric on inflation at the Jackson Hole Symposium revived rate hike bets, with the CME FedWatch Tool showing around a 65% probability of a hike at the September 15-16 meeting, up from roughly 40% a week ago.

Fed Governor Michael Barr added to the hawkish tone on Tuesday, saying that “the persistence of inflation above target creates risks.” Barr said he favours steady rates if confident inflation is moderating but warned that “if inflation doesn’t moderate soon, it will be time for an interest rate hike.”

At the same time, rising Oil prices are adding to inflation concerns and reinforcing expectations that major central banks may need to keep monetary policy tight. West Texas Intermediate (WTI) Oil advances for a second consecutive day following the latest flare-up around the Strait of Hormuz.

Typically, inflation and geopolitical concerns support Gold. However, the market is currently reacting through the interest rate channel, and the metal tends to perform poorly when interest rates and Treasury yields rise.

Sellers are therefore likely to retain the upper hand in the near term, although upcoming US economic data and developments in the Middle East could trigger fresh volatility. Attention now shift to the ADP Employment Change report on Wednesday and the closely watched Nonfarm Payrolls (NFP) report on Friday.