Gold Prices React to US Inflation Data and Central Bank and CPI
Updated
Following the release of US inflation data on Thursday, gold prices experienced a decline, reversing the earlier gains made within the first half of the day. The headline Consumer Price Index (CPI) for July registered at 3.2% year-on-year, slightly below the anticipated 3.3% consensus, indicating a mild softening. Nonetheless, this figure marked an increase from the previous month's outcome of 3%. Simultaneously, the core CPI, which excludes volatile elements, exhibited a minor decrease to 4.7% year-on-year from the anticipated 4.8%.
Concomitantly, yields on Treasury bonds also trended upwards, as depicted in the accompanying chart. A more thorough analysis of the expectations regarding the Federal Reserve's monetary policy unveils a nuanced perspective. While the immediate projections for interest rates remained largely unaffected by the report, a longer-term outlook reveals noteworthy changes. Notably, the predictions for the next three years or more have undergone the most pronounced adjustment towards a more stringent stance, indicating a sustained hawkish approach by the central bank.
Over the past day, Mary Daly, President of the San Francisco Federal Reserve, emphasized the ongoing tasks that the central bank still needs to address. Consequently, the surge in longer-term Treasury rates is unsurprising, reflecting the increasing sentiment within financial markets that the central bank will prolong the time before initiating the next cycle of rate reductions. This sentiment had an anticipated adverse impact on gold, traditionally considered a safeguard against fiat currency fluctuations, resulting in its less favorable performance.
XAUUSD BUY 1915 - 1913💯💯
✅ TP1: 1923
✅ TP2: 1928
🛑 SL: 1912
Concomitantly, yields on Treasury bonds also trended upwards, as depicted in the accompanying chart. A more thorough analysis of the expectations regarding the Federal Reserve's monetary policy unveils a nuanced perspective. While the immediate projections for interest rates remained largely unaffected by the report, a longer-term outlook reveals noteworthy changes. Notably, the predictions for the next three years or more have undergone the most pronounced adjustment towards a more stringent stance, indicating a sustained hawkish approach by the central bank.
Over the past day, Mary Daly, President of the San Francisco Federal Reserve, emphasized the ongoing tasks that the central bank still needs to address. Consequently, the surge in longer-term Treasury rates is unsurprising, reflecting the increasing sentiment within financial markets that the central bank will prolong the time before initiating the next cycle of rate reductions. This sentiment had an anticipated adverse impact on gold, traditionally considered a safeguard against fiat currency fluctuations, resulting in its less favorable performance.
XAUUSD BUY 1915 - 1913💯💯 ✅ TP1: 1923
✅ TP2: 1928
🛑 SL: 1912
Note
Following the broadly anticipated U.S. July inflation data, gold prices concluded Thursday's session with a marginal decrease. However, for the third consecutive day, the precious metal experienced a decline due to the influence of elevated bond yields and a strengthened dollar observed over the past few weeks.Note
After the U.S. inflation data was made public, gold prices showed an initial strengthening, but those gains faded as significant stock indexes surged. The Dow Jones Industrial Average surged by more than 400 points during morning trading before subsequently retreating.Note
"A peak in the dollar might be in place, but gold won't be surging if Wall Street continues to buy up stocks," said Edward Moya, senior market analyst at OANDA.Note
"These figures hold vital significance for the Federal Reserve, aligning with the downward trajectory of inflation towards its 2% objective," commented Jamie Dutta, a market analyst at Vantage. Dutta also noted, "Shelter costs introduce a substantial variable, yet the inflation in rental rates is anticipated to moderate in the upcoming months. This moderation is attributed to the standard delay linked to the reduced rental rates witnessed last year."Note
Gold inches up during the Asian morning session, driven by subdued U.S. inflation data that bolsters hopes of the Fed halting interest rate hikes. This movement aligns with gold's traditional inverse correlation with the U.S. dollar. Edward Moya, an analyst at Oanda, suggests a potential peak in the dollar's strength. Nevertheless, he indicates that a substantial rise in gold prices is improbable due to the prevalent investor sentiment favoring equities. Currently, spot gold records a modest 0.1% increase, reaching $1,914.75 per ounce.Note
XAUUSD SELL 1917- 1919💯💯 ✅ TP1: 1915
✅ TP2: 1910
🛑 SL: 1923
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