- Gold receives aggressive bids in the last hour and jumps to a new multi-week high.
- The broad sell-off in dollars following the US CPI provides a good boost to the commodity.
- Diminishing odds of a further Fed rate hike in September further benefits the metal.
- The risk appetite boost caps the XAU/USD haven and warrants bulls to be cautious.
The Prayed turns positive for the third day in a row on Wednesday and jumps to a new six-week high around the $1,808 region during the early American session.
The US dollar weakens across the board and falls to its lowest level since July 4, reacting to softer consumer inflation numbers. This turns out to be a key factor pushing dollar-denominated gold higher for the third day in a row on Wednesday. The Bureau of Labor Statistics reported that the US headline CPI was flat in July, versus expectations for a modest 0.2% rise and 1.3% rise in the previous month.
Furthermore, the annual rate slowed more than expected, to 8.<5% in July from 9.1% previously. In addition, the core CPI, which excludes volatile food and energy prices, was stable at 5.9% year-on-year, below the forecast for a 6.1% increase. The data suggests that US inflation may have already peaked and has pushed back expectations of aggressive Fed tightening, which, in turn, weighs heavily on the dollar.
In fact, the odds of a 75 basis point Fed rate hike in September are down to just 35, down from 80% prior to the CPI. This triggers a sharp decline in US Treasury yields, helping to drive flows into the yieldless yellow metal. The sharp rise, meanwhile, lifts spot prices above the $1,800 mark, although the huge rally in US equity futures prevents safe-haven gold from gaining ground further.
XAU/USD is now retracing below the $1,800 benchmark, warranting some caution on the part of bulls and positioning for any further appreciation moves. That said, any significant pullback could still be seen as a buying opportunity and remain limited amid concerns about a global economic slowdown and US-China tensions over Taiwan.
Technical levels
Source: Fx Street
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