Gold Price Falls After US CPI Report, Diminishing Odds for 50-bps Rate Cut Lift USD

Gold price (XAU/USD) saw a decline following the release of the crucial US Consumer Price Index (CPI) report on Wednesday, as hopes for a larger interest rate cut by the Federal Reserve in September faded. The risk-on sentiment in the market also contributed to the drop in the safe-haven metal, marking its first red close in three days. However, the potential for the Fed to begin easing its policies soon provided some support, helping gold bounce back from the $2,500 level.

Investors are now anticipating a 25-bps rate cut at each of the remaining three Fed policy meetings in 2024. This expectation has boosted the gold price during the Asian trading session on Thursday. However, the upward momentum is limited by increased USD buying, driven by higher US Treasury bond yields. The XAU/USD remains range-bound, cautioning traders to tread carefully and await a clear direction.

Market Movers: Gold Price Struggles as Traders Adjust Expectations for Fed Policy Easing

  • Gold price fell post-US CPI report, as investors revised expectations for a 50-bps rate cut by the Fed.
  • The US Bureau of Labor Statistics reported a 0.2% increase in headline CPI for August, with a yearly rate decrease to 2.5%.
  • Core CPI rose by 0.3% in August and 3.2% annually, matching market expectations.
  • Markets now predict an 87% chance of a 25-bps rate cut at the upcoming FOMC meeting, up from 71% pre-CPI data.
  • Diminished odds of aggressive policy easing boost US Treasury bond yields and the USD, weighing on gold.
  • Traders await the US Producer Price Index (PPI) release for further market direction amidst Fed rate-cut expectations.

Technical Outlook: Gold Price Consolidates, Eyes Breakout from Range

Technically, gold price’s recent consolidation forms a bullish rectangle pattern within a broader uptrend. Oscillators are mixed on the daily chart, suggesting caution before placing new bets. A breakout above $2,530-2,532 could trigger further gains, while a drop below $2,500 may find support near $2,485 and $2,470 levels. A break below could test the 50-day SMA near $2,452, with potential further decline to sub-$2,400 levels.

Gold FAQs:

  • Gold is a safe-haven asset, used as a store of value and hedge against inflation and currency depreciation.
  • Central banks hold significant gold reserves to support their currencies during economic uncertainties.
  • Gold has an inverse correlation with USD and Treasuries, rising in times of Dollar weakness and market turmoil.
  • Gold prices are influenced by geopolitical events, economic conditions, and USD performance.

Analysis: Gold price faces challenges post-US CPI report, as Fed rate-cut expectations shift. Traders should monitor key levels for potential breakout or reversal, considering the impact of USD strength and market sentiment. Understanding gold’s role as a safe-haven asset and its relationship with economic factors can help investors navigate market fluctuations and make informed decisions.

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