- Gold falls as the US CPI rises, reinforcing the current Fed policy position and raising the US dollar.
- Trump announces an agreement with Indonesia and demands cuts in interest rates.
- Operators focus their attention on the PPI, retail sales and consumer’s feeling data.
The price of gold collapsed on Tuesday, lowering more than 0.40% after the publication of the latest inflation report in the United States (USA), which promoted the US dollar to the detriment of precious metal. The comments of the president of the US, Donald Trump, and risk aversion, instead of promoting gold prices, weighed on the precious metal, which is traded at $ 3,329 after reaching a daily peak of $ 3,366.
The mood of the market is mixed, with the US actions fluctuating between profits and losses after the publication of the June consumer price index (CPI). The general and underlying figures in annual terms increased, noting that tariffs are beginning to push up prices. Consequently, the operators seem to be convinced that the Federal Reserve (FED) will keep the rates without changes and will wait for more data before the September meeting, after Jackson Hole’s symposium.
Last weekend, US President Donald Trump announced 30% tariffs on the European Union (EU) and Mexico. Initially, gold prices rose, but operators faded the movement and brought down prices in the middle of fears that an advertisement of an agreement could be made in days or weeks.
In addition, Trump is still active in social networks and revealed a commercial agreement with Indonesia. He also spoke on the latest inflation report and demanded that the Federal Reserve reduce interest rates.
This week, operators will be attentive to inflation on the producer’s side, retail sales, employment data and the consumer’s feeling report at Michigan University.
Daily Gold Market Movements: High inflation in the US drives the US dollar, sends US yet yields
- The price of gold falls but remains limited within the range of 3,300 $ -3,350 $ as the US dollar shoots. The US dollar index (DXY), which tracks the value of the dollar against a basket of six coins, rises 0.55% to 98.64.
- The last inflation report in the US revealed that the June consumer price index (CPI) rose 2.7% year -on -year, in line with expectations, while the underlying IPC stood at 2.9%, slightly below the 3% consensus, but still well above the 2% of the Fed objective.
- Consequently, monetary markets had discounted less than 50 basic points (PBS) of relief, with investors discounting more than 43 pbs of rates cuts towards the end of the year.
- The yields of the US Treasury bonds had risen dramatically, which triggered a reduction in feat cuts by the Federal Reserve. The 10 -year Treasury bonus yield, which generally correlates negatively with gold, rises five basic points (PBS) to 4,487%.
- The US president, Trump announced a commercial agreement with Indonesia, in which the latter will pay 19% of tariffs, while US products will be exempt from tariffs. He said that similar agreements are being prepared, and that “Indonesia has committed to buy 15,000 million dollars in energy from the US, 4.5 billion dollars in American agricultural products and 50 Boeing airplanes, many of them 777”.
- The president of the Boston Fed, Susan Collins, said that achieving the bank’s mandates is about achieving the objectives over a prolonged period, adding that he does not know precisely where the maximum employment is located. He said there is some evidence that the labor market is cooling.
Xau/USD technical perspective: The price of gold falls below the 20 -day SMA
The upward trend of gold price remains intact, but the fall in progress could threaten the bulls if there is a higher decline, with the Xau/USD falling below the minimum of June 30, $ 3,246. The relative force index (RSI) has become bassist, but is flat, indicating that neither buyers nor sellers are in charge.
For a bearish continuation, gold needs to exceed $ 3,300. Next is the minimum of June 30 and the minimum of May 16, $ 3.201. On the contrary, if the Xau/USD recovers above $ 3,350, the next resistance would be $ 3,400, followed by $ 3,450 and the historical maximum of $ 3,500.
GOLD – FREQUENT QUESTIONS
Gold has played a fundamental role in the history of mankind, since it has been widely used as a deposit of value and a half of exchange. At present, apart from its brightness and use for jewelry, precious metal is considered an active refuge, which means that it is considered a good investment in turbulent times. Gold is also considered a coverage against inflation and depreciation of currencies, since it does not depend on any specific issuer or government.
Central banks are the greatest gold holders. In their objective of supporting their currencies in turbulent times, central banks tend to diversify their reserves and buy gold to improve the perception of strength of the economy and currency. High gold reserves can be a source of trust for the solvency of a country. Central banks added 1,136 tons of gold worth 70,000 million to their reservations in 2022, according to data from the World Gold Council. It is the largest annual purchase since there are records. The central banks of emerging economies such as China, India and Türkiye are rapidly increasing their gold reserves.
Gold has a reverse correlation with the US dollar and US Treasury bonds, which are the main reserve and shelter assets. When the dollar depreciates, the price of gold tends to rise, which allows investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rebound in the stock market tends to weaken the price of gold, while mass sales in higher risk markets tend to favor precious metal.
The price of gold can move due to a wide range of factors. Geopolitical instability or fear of a deep recession can cause the price of gold to rise rapidly due to its condition of active refuge. As an asset without yield, the price of gold tends to rise when interest rates lower, while the money increases to the yellow metal. Even so, most movements depend on how the US dollar (USD) behaves, since the asset is quoted in dollars (Xau/USD). A strong dollar tends to keep the price of gold controlled, while a weakest dollar probably thrusts gold prices.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
