Gold price falls, reversing a portion of Thursday’s milder US CPI inspired bullish advance.
Gold (XAUUSD) maintained strong positive traction on Thursday, rallying to the $2,424-2,425 range, its highest level since May 22 after another weak US inflation report raised expectations that the Federal Reserve (Fed) would lower interest rates in September.
US Dollar (USD) bounce from a near-three-month low, aided by Yields on US Treasury bonds have increased little.
The commodity, however, lacks follow-through buying amid a small US Dollar (USD) bounce from a near-three-month low, aided by Yields on US Treasury bonds have increased little. This, combined with the overall positive feeling in the equities markets, spurs some selling of the safe-haven precious metal during the European session on Friday. For the time being, the gold price appears to have broken a three-day winning streak, while any real correction remains difficult in light of expectations that the Fed would begin its rate-cutting cycle sooner rather than later. Aside from that, political uncertainty in the United States and Europe, as well as geopolitical dangers and concerns about a global economic slowdown, should act as a tailwind for the XAUUSD, so bears should exercise caution.
Traders now await the release of the US Producer Price Index (PPI).
Traders now await the release of the US Producer Price Index (PPI) and the University of Michigan Consumer Sentiment survey. anticipating a renewed thrust later in the North American session.
Daily Market Movers: Gold price drifts lower despite rising US bond rates and moderate USD strength.
Gold prices rose beyond $2,400 on Thursday after the announcement of softer-than-expected US consumer inflation numbers, raising expectations of a September interest rate drop by the Federal Reserve.
The US Bureau of Labor Statistics (BLS) stated that the headline Consumer Price Index (CPI) fell in June for the first time in more than four years, with the yearly rate falling to 3% from 3.3% in May.
Meanwhile, the core CPI, which excludes volatile food and energy costs, was up 0.1% during the reported month and grew 3.3% year on year, missing consensus predictions and the 3.4% The increase was registered in May.
Rising September Fed rate cut bets should provide a tailwind for the metal and limit losses.
Investors reacted quickly, with the CME Group’s FedWatch Tool indicating that the Fed will decrease borrowing costs at the September monetary policy meeting, with a probability of more than 90%.
Furthermore, the December 2024 fed funds rate futures contract indicates that the US central bank would decrease policy rates by 49 basis points (bps) near the end of the year, up from 39 bps the day before.
Mary Daly, president of the San Francisco Fed, praised improving inflation numbers and stated that the economy seemed to be on track for one or two rate decreases this year.
Separately, St. Louis Fed President Alberto Musalem stated that recession risks remain low. The disinflation process is still proceeding, but policymakers would want to see greater progress.
Meanwhile, the yield on the benchmark 10-year US government bond fell to its lowest level since March, pulling the US dollar to a three-month low and offering a significant lift to gold.
This overshadowed the better-than-expected release of US initial jobless claims, which fell to 222K for the week ending July 6, compared to predictions of 236K and the prior figure of 239K.
The XAUUSD, on the other hand, struggles to capitalize on the overnight strong move up amid a slight USD uptick during the Asian session on Friday, despite the fact that the fundamental backdrop supports optimistic traders.
