GOLD regains traction on geopolitical risks, ahead of US inflation test
Gold returns to green early Wednesday, looking to retest record highs amid intensifying geopolitical tensions.
US Dollar stalls its recovery from the Nonfarm Payrolls Benchmark Revision-led blow.
Bets for aggressive Fed rate cuts are on the table ahead of US PPI inflation data.
Gold attempts a fresh leg north despite the daily RSI still heavily overbought.
Gold is treading water near $3,650 early Thursday, lacking a clear directional impetus heading into the US CPI inflation test.
Gold has entered an upside consolidative phase below all-time highs of $3,675 in Asian trading on Thursday, following a decent comeback on Wednesday.
The next decisive move in the bright metal remains at the mercy of the August US CPI report as it could affirm the markets’ expectations for three interest rate cuts by the Fed this year, while also determining if the US central bank would opt for a jumbo rate cut next week.
Markets are pricing in a 92% chance of a 25 basis points rate cut at the Fed’s September meeting and an 8% probability of a 50 bps rate cut, according to the CME Group’s FedWatch tool.
Meanwhile, Goldman Sachs, Barclays and National Australia Bank now see three Fed rate reductions this year, starting next week.
The US annual CPI is forecast to rise 2.9% in August, compared to a 2.7% growth seen before, while the core CPI is expected to increase by 3.1%, at the same pace as in July.On a monthly basis, US CPI and core CPI are set to advance by 0.3% in the same period.Markets are expecting the impact of US President Donald Trump’s tariffs to feed into prices in the August prints.
Therefore, a hotter-than-expected US CPI readings could pour cold water on the latest growing bets of aggressive Fed easing in the balance of the year, offering some much-needed comfort to the USD at the expense of the non-yielding Gold.
On the other hand, Gold could renew record highs on a downside surprise in the US inflation data, which would double down on expectations of more than two Fed rate cuts this year.An unexpected slowdown in the US consumer price pressures cannot be ruled out after Wednesday’s surprise fall in producer inflation for August.
The PPI for final demand dipped 0.1% last month after a downwardly revised 0.7% jump in July. Annually, PPI inflation fell to 2.6% in August versus 3.1% (revised from 3.3%) in July.Softer-than-expected US PPI data exerted additional downside pressure on the Greenback, already undermined by Trump’s fresh attacks on Fed Chair Jerome Powell.
Amidst sustained USD weakness, Gold further benefited from lingering geopolitical tensions, especially in the face of Tuesday’s suspected Russian drone incursions into Poland’s airspace and Israel attacks on Hamas leadership in Doha, Qatar.
Daily technical analysis
The daily chart shows that Gold faces two-way risks in the lead-up to the US CPI showdown.
The 14-day RSI is gradually easing from the extreme overbought zone, still remains near 78, as of writing.
If sellers emerge powerful, the immediate support is seen at the $3,600 round number, below which this week’s low of $3,578 could be tested.
A sustained break below the latter will open up a fresh downside toward the $3,550 psychological mark.
However, if buyers spring back on US CPI cool off, the record high of $3,675 will be threatened once again on the way to the $3,700 levelThe next topside barrier is seen at around the $3,750 region.
GOLD regains traction on geopolitical risks, ahead of US inflation test
Gold is treading water near $3,650 early Thursday, lacking a clear directional impetus heading into the US CPI inflation test.
Gold has entered an upside consolidative phase below all-time highs of $3,675 in Asian trading on Thursday, following a decent comeback on Wednesday.
The next decisive move in the bright metal remains at the mercy of the August US CPI report as it could affirm the markets’ expectations for three interest rate cuts by the Fed this year, while also determining if the US central bank would opt for a jumbo rate cut next week.
Markets are pricing in a 92% chance of a 25 basis points rate cut at the Fed’s September meeting and an 8% probability of a 50 bps rate cut, according to the CME Group’s FedWatch tool.
Meanwhile, Goldman Sachs, Barclays and National Australia Bank now see three Fed rate reductions this year, starting next week.
The US annual CPI is forecast to rise 2.9% in August, compared to a 2.7% growth seen before, while the core CPI is expected to increase by 3.1%, at the same pace as in July.On a monthly basis, US CPI and core CPI are set to advance by 0.3% in the same period.Markets are expecting the impact of US President Donald Trump’s tariffs to feed into prices in the August prints.
Therefore, a hotter-than-expected US CPI readings could pour cold water on the latest growing bets of aggressive Fed easing in the balance of the year, offering some much-needed comfort to the USD at the expense of the non-yielding Gold.
On the other hand, Gold could renew record highs on a downside surprise in the US inflation data, which would double down on expectations of more than two Fed rate cuts this year.An unexpected slowdown in the US consumer price pressures cannot be ruled out after Wednesday’s surprise fall in producer inflation for August.
The PPI for final demand dipped 0.1% last month after a downwardly revised 0.7% jump in July. Annually, PPI inflation fell to 2.6% in August versus 3.1% (revised from 3.3%) in July.Softer-than-expected US PPI data exerted additional downside pressure on the Greenback, already undermined by Trump’s fresh attacks on Fed Chair Jerome Powell.
Amidst sustained USD weakness, Gold further benefited from lingering geopolitical tensions, especially in the face of Tuesday’s suspected Russian drone incursions into Poland’s airspace and Israel attacks on Hamas leadership in Doha, Qatar.
Daily technical analysis
The daily chart shows that Gold faces two-way risks in the lead-up to the US CPI showdown.
The 14-day RSI is gradually easing from the extreme overbought zone, still remains near 78, as of writing.
If sellers emerge powerful, the immediate support is seen at the $3,600 round number, below which this week’s low of $3,578 could be tested.
A sustained break below the latter will open up a fresh downside toward the $3,550 psychological mark.
However, if buyers spring back on US CPI cool off, the record high of $3,675 will be threatened once again on the way to the $3,700 levelThe next topside barrier is seen at around the $3,750 region.
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