Everbright Futures: PPI rose beyond expectations, gold prices may fluctuate and strengthen in the short term

Last week, the COMEX gold price rose by 0.68% to $2,416/ounce, and the main contract of Shanghai Gold rose by 1.9% to 568.54 yuan/gram.

From the market situation last week, the unexpected decline in the US CPI data has significantly warmed up the capital sentiment, and the market's confidence in the September interest rate cut has increased significantly. The cooling of the CPI in all dimensions in June, the annual rate and the monthly rate, the seasonal adjustment and the non-seasonal adjustment, all reflect the positive progress made by the Federal Reserve in the second quarter of inflation control. In addition, the initial value of the University of Michigan Consumer Confidence Index in July was lower than expected (the expected value was 68.5), falling from the previous value of 68.2 to 66, which proves that the data of the weak US economy has increased again. Coupled with the recognition of the cooling of inflation by Federal Reserve Chairman Powell, the certainty of the Federal Reserve's accelerated rate cut may increase. Driven by optimism, the gold price rose significantly during the week.

However, the PPI data released on Friday may shake the confidence of some participants in the September interest rate cut. From the data, the monthly rate of PPI in the United States in June was higher than expected (0.1%), from the previous value of -0.2% to 0.2%; the annual rate of PPI in June was also higher than expected (2.3%), from the previous value of 2.2% (revised to 2.4%) to 2.6%. In theory, changes in production costs and increases in PPI will be passed on to consumers through the supply chain, which may lead to higher CPI. Therefore, the unexpected rise in PPI data in June has made the market worry that the CPI will be hindered from falling in the following months due to the impact of PPI data, and inflation stickiness may still exist. The performance of inflation expectations may reflect market concerns to a certain extent. Data show that the initial value of the expected one-year inflation rate in the United States in July has fallen from the previous value, but it is the same as expected, maintaining at 2.9%. This data may indicate that we should not be overly optimistic about the inflation data in July, and whether the downward trend of inflation in the second quarter can continue remains to be seen.

On the whole, compared with last week, the unexpected rise in PPI may weaken the force that drives gold prices to strengthen. However, funds may continue to price in the optimistic expectation of a rate cut in September, so the strong trend of gold prices may continue at the beginning of the week. The evolution of the situation in the Middle East, especially the repeated negotiations between Israel and Kazakhstan, may amplify the volatility of gold prices. Affected by the above factors, gold prices may continue to fluctuate and strengthen in the short term. Looking ahead to this week, many Fed officials will make intensive statements, and the monthly rate of retail sales in the United States, a "horrible data", will hit again. Pay attention to the impact of officials' speeches and economic data performance on gold prices.