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As Inflation Seems to Stay Put, the Gold Price Is Looking at a Break

Leon Kramer

ByLeon Kramer

Aug 11, 2023

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  • Selling pressure emerges for gold prices following a brief recovery preceding inflation data.
  • Market participants eagerly anticipate the release of inflation data in the United States, as it can provide valuable insights and direction for investors.
  • The Federal Reserve According to Williams and Harker, interest rates are believed to have reached their highest point.

The XAU/USD pair experiences a decline as the US Dollar gains strength due to reduced risk appetite among market participants. The recovery of the precious metal proves insufficient, despite the anticipation of Federal Reserve (Fed) policymakers that interest rates by the central bank have reached their peak for the time being. Additionally, the Federal Reserve may contemplate potential rate cuts in the upcoming year, provided that the deceleration of inflation persists and there is a further slowdown in job hiring.

Investors eagerly anticipate releasing the United States Consumer Price Index (CPI) data on Thursday, as it will provide valuable insights for September’s monetary policy guidance. Investors expect a rebound in headline CPI following a period of softness as gasoline prices rise due to recovered oil prices. Hiring in the US experienced a deceleration during July, coinciding with the US Unemployment Rate maintaining its proximity to historically low levels. The upcoming inflation data for July will serve as a foundation for the forthcoming interest rate determination.

Daily Market Movers: Gold Falls Before Inflation Data

  • The recovery attempt of the gold price proved unsuccessful, despite the US Dollar maintaining a stable position before the release of United States inflation data.
  • In recent developments, the US Dollar Index has detected a temperature change due to the neutral interest rate guidance provided by Federal Reserve policymakers.
  • According to a statement by Philadelphia Fed President Patrick Harker, the central bank may consider maintaining interest rates at their current level, allowing monetary policy to fulfill its intended function. Fed Harker’s status as a non-voting member should be taken into consideration by investors.
  • According to a prominent official, it has been suggested that interest rates may have reached their highest point for the time being. Furthermore, the central bank is anticipated to contemplate implementing rate reductions in the upcoming year.
  • The US Dollar Index experiences a significant correction, nearing 102.40, as market sentiment shifts towards a positive direction. This shift is backed by the stronger-than-anticipated exchange rate fixing by the People’s Bank of China (PBoC).
  • The US Dollar’s elevated levels remain unaffected by the hawkish remarks made by Fed Governor Michelle Bowman, who highlighted the combination of persistent inflation and a buoyant labor market as reasons to consider further policy tightening.
  • Following reduced hiring activity and consistent wage expansion, market participants are directing their attention toward the forthcoming release of inflation figures. The data is scheduled to be published on Thursday at 12:30 GMT.
  • According to estimates, both headline and core CPI, which excludes the influence of volatile food and oil prices, remained steady at a monthly rate of 0.2% in July. The projected annual headline CPI is anticipated to experience a recovery, reaching 3.3% compared to the previous reading of 3.0% in June. Contrarily, there is a projection for a slight deceleration in core inflation to 4.7%, compared to the last lesson of 4.8%.
  • A robust rebound in worldwide oil prices supports a more substantial agreement on headline CPI.
  • A potential resurgence in inflationary pressures could lead to the Federal Reserve contemplating continuing interest rate hikes.
  • According to a report by Bloomberg, there are plans to prohibit investment in Chinese artificial intelligence (AI) companies by the US government. The administration focuses on Chinese companies that generate over 50% of their revenue from the domains of quantum computing and AI.
  • According to the National Federation of Independent Business (NFIB), the Small Business Optimism Index reached 91.1 in the previous month, marking its highest point since November 2022. This increase can be attributed to a reduction in worries regarding inflation expectations.
  • On Tuesday, the US Census Bureau released data indicating a Goods & Services Trade Balance deficit of $65.5 billion, reaching a three-month low. This decline can be attributed to a decrease in merchandise imports, which can be attributed to a moderation in consumer demand.

Technical Analysis Shows That the Price of Gold Looks Weak Above $1,920

The price of gold has discovered a temporary support level after examining the significant $1,920.00 mark. The valuable metal must navigate through numerous filters in its path to achieve a robust recovery. From a broader perspective, the vulnerability of the Gold price becomes apparent following a Bear Cross observed between the 20 and 50-day Exponential Moving Averages (EMAs). The 200-EMA, for $1,907.00, will continue supporting the precious metal shortly.

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Leon Kramer

Leon Kramer

Leon Kramer, a renowned financial author, enlightens Main Forex News readers with his deep understanding of currency markets. His years in global finance, combined with an intuitive grasp of trends, delivers insightful, up-to-the-minute foreign exchange analysis.

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