World gold prices continued to face strong selling pressure in the trading session on July 17, falling below the psychological threshold of 4,000 USD/ounce after new data showed that manufacturing activity in the US recovered much more strongly than market expectations.
At one point, the precious metal was only $3,996/ounce, down nearly 2% compared to the previous session, breaking through the important support level of $4,000/ounce.
The main driving force comes from the report showing that the manufacturing sector in the Philadelphia area has improved sharply, increasing expectations that the US economy will still be able to withstand high interest rates.
According to the Philadelphia Fed, the July production outlook index reached 41.4 points, up sharply from 10.3 points in June and far exceeding analysts' forecast of about 13 points. This is also the highest level since November 2021.
The report shows that more than 53% of businesses recorded improved production activities, while only about 12% said the situation worsened.
Not only did general operations improve, many component indices also simultaneously increased sharply. The new order index increased to 37 points, the highest since November 2021; the delivery index reached 33.7 points, the highest level since April; while the employment index increased to 10 points, the highest since December last year.
Notably, the working hours index increased to 14 points, the highest level since January 2025, reflecting continued production demand.
Meanwhile, cost pressure has not shown signs of cooling down. The input price index increased to 53.9 points, with more than 54% of businesses saying that raw material costs continue to increase. The selling price index also increased to 27.4 points, showing that businesses still have the ability to transfer part of the costs to customers.
These figures raise expectations that the Fed will continue to maintain tight monetary policy to bring inflation back to its target. This is a disadvantage for gold, because high interest rates increase the opportunity cost of holding non-performing assets.
However, the prospects of US businesses are still relatively positive. Nearly 52% of surveyed businesses expect operations to continue to improve in the next six months, although the level of optimism has decreased compared to the previous month. The general outlook index for six months decreased to 34.4 points, but still shows confidence in the growth of the manufacturing sector.
New developments show that the gold market continues to be sensitive to US economic data. If upcoming indicators on jobs, inflation and consumption continue to be positive, expectations that the Fed will maintain high interest rates may further put pressure on gold prices in the short term.
