Gold falls to $1,700, lowest since September after US CPI.

• The price of gold fell for the third consecutive day and fell to a new low so far this year.
• The rise in the CPI in the US reaffirmed the Fed’s expectations and exerted pressure.
• The sharp rise in US bond yields and the rise in the dollar contributed to the selling bias.

the price of gold it attracted fresh selling near the $1,732 area during the early hours of the American session and fell for the third day in a row on Wednesday. The latest leg down came after the release of higher-than-expected US consumer inflation numbers and dragged XAUUSD to its lowest level since August 2021, around the $1,710 zone. at $1,705.

Gold price ignores stubbornly high inflation

Gold, normally seen as a hedge against rising inflation, failed to impress bulls after data releases from the US showed headline CPI accelerated to a new four-decade high in June. In fact, the gauge accelerated to 9.1% YoY from 8.6% in May and rose 1.3% MoM, beating expectations. For its part, core inflation, which excludes food and energy prices, stood at 0.7% month-on-month and 5.9% year-on-year in June, once again exceeding consensus estimates.

Historical graph of the US CPI

The Fed’s rate hike bets continue to weigh
Against the backdrop of the Federal Open Market Committee (FOMC) minutes released last week, the stronger-than-expected US CPI report reaffirmed bets on more aggressive rate hikes by the Fed. Federal. Markets are pricing in almost 80% chances of a 75bp rate hike on July 27, with the implied 100bp odds now at 35%. This, in turn, pushed US Treasury yields sharply higher and was seen as a key factor putting strong downward pressure on non-yielding gold.

A stronger dollar puts additional pressure

Prospects for faster monetary policy tightening by the Federal Reserve helped the US dollar reverse modest intraday losses and hit a new two-decade high. This helped drive flows away from dollar-denominated gold. That said, a new wave of global risk aversion could offer some support to the safe haven XAUUSD amid growing recession fears.

Recession fears could cap losses

Investors remain concerned that more aggressive action by major central banks to rein in inflation, the ongoing war between Russia and Ukraine and the latest outbreak of COVID-19 will challenge global economic growth. This has caused prolonged selling in global equity markets and tends to benefit traditional safe-haven assets, including gold.

Gold Price Technical Outlook

The price of gold is now looking for $1,700 to provide some support. A convincing break below that level would be seen as a new trigger for bearish traders and drag XAUUSD to the September 2021 low around the $1,787-$1,786 region. The bearish trajectory could extend further to challenge the 2021 yearly low near the $1,677-$1,676 zone.

On the other hand, any significant recovery attempts seem to face stiff resistance near the daily high around the $1,732 area. Sustained strength beyond that could trigger a short covering move towards the $1,744 area en route to the $1,752 region and the strong horizontal support point at $1,767.