During the U.S. trading session on Wednesday (September 11), the gold market fluctuated violently due to the U.S. CPI data. After the U.S. CPI data was released, spot gold once fell to $2,500/ounce, a drop of nearly $30 from the intraday high.
The U.S. CPI report dealt a heavy blow to the possibility of a 50 basis point interest rate cut
Gold prices fell on Wednesday as the U.S. CPI report prompted investors to lower their expectations for a sharp interest rate cut by the Federal Reserve next week, leading to a stronger dollar and U.S. bond yields, and gold prices were under pressure.
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The Bureau of Labor Statistics under the U.S. Department of Labor reported on Wednesday that the U.S. Consumer Price Index (CPI) rose 0.2% month-on-month in August, in line with market expectations. The U.S. CPI rose 2.5% year-on-year in August, falling for the fifth consecutive month, in line with market expectations and lower than the previous value of 2.9%.
But it is worth noting that the U.S. core CPI rose 0.3% month-on-month in August, the largest increase in four months, and the increase was higher than the expected 0.2%. Economists believe that the core inflation rate is a better reflection of potential inflation than the overall CPI. The U.S. core CPI rose 3.2% year-on-year in August, in line with forecasts.
Institutional analysis believes that higher-than-expected U.S. core inflation data will be a problem for the Fed to cut interest rates by 50 basis points next Wednesday. The focus now is on the core CPI monthly rate data, which tends to increase concerns about stubborn inflation. FOMC members who are worried about monetary policy turning too fast or too decisively will certainly strongly oppose a 50 basis point rate cut next week.
Neil Birrell, chief investment officer of Premier Miton Investors, commented on the U.S. CPI report and said that the possibility of the Fed cutting interest rates by 50 basis points next week was hit hard by this number.
According to CME's "Fed Watch" tool, the market currently expects the probability of a 25 basis point rate cut in the United States to be 87%, while the probability before the data was released was 71%.
After the CPI data showed that the Fed may only cut interest rates by 25 basis points in September, the U.S. dollar index rose sharply in the short term, recovering all the losses during the day and once rising to an intraday high of 101.82. The dollar index eventually closed up about 0.1% at 101.75.
Spot gold fell sharply to $2,500.74 per ounce after the release of the U.S. CPI data, down nearly $30 from the intraday high of $2,529.13 per ounce.
Gold prices subsequently rebounded from their lows. Spot gold eventually closed down 0.2% on Wednesday at $2,511.28 per ounce.
FXStreet analyst Christian Borjon Valencia pointed out that gold prices fell from Wednesday's high of $2,529 per ounce after U.S. inflation data increased the possibility of a 25 basis point rate cut by the Federal Reserve. Rising U.S. Treasury yields and a stronger dollar put pressure on non-gold. The 10-year U.S. Treasury yield climbed 1.5 basis points to 3.655%.
Bob Haberkorn, senior market strategist at RJO Futures, said: "Inflation is still there, and consumers still feel it. If the Fed cuts interest rates by 50 basis points, it means that they will give in to inflation. At this juncture, the Fed is almost forced to cut interest rates by 25 basis points."
Tai Wong, an independent metal trader in New York, said: "The rise in core CPI will more or less consolidate the possibility of a 25 basis point rate cut by the Fed next week. Gold may have to wait for a while before it can refresh its historical high price."
The U.S. will release the producer price index (PPI) report on Thursday, which may also help the market assess the scale of the Fed's September rate cut. In addition, investors are also paying attention to the U.S. initial jobless claims report.
How to trade gold?
FXStreet analyst Christian Borjon Valencia pointed out that gold prices were suppressed and consolidated in the $2,500-2,531/ounce area. The relative strength index (RSI) was flat above the neutral line, indicating that neither buyers nor sellers were in control of the situation.
Valencia said that if gold prices conquer the all-time high of $2,531/oz, the next resistance level will be the $2,550/oz mark. Once the latter is broken, the next target will be the psychological level of $2,600/oz.
Valencia added that, on the contrary, if gold prices fall below $2,500/oz, the next support level will be the August 22 low of $2,470/oz. In the event of further weakness, the next support area will be the confluence of the May 20 high and the 50-day simple moving average (SMA) (between $2,450-2,440/oz).
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2024-09-12
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