Small gains for gold after US inflation data

Gold closed slightly higher on Wednesday, holding the $1,810 level, after the impressive slowdown in US inflation in July, but with Goldman Sachs’ ongoing revision of its short-term outlook forecasts preventing precious metal to claim something better.

More specifically, the significant annualized slowdown in the US consumer price index in July, to 8.5% from 9.1% in June, boosted gold prices as it appeared to open a window for the Federal Reserve to move less aggressively at its next rate meeting in September,

At the same time, this development led to the slide of the dollar and the retreat of bond yields, increasing the attractiveness of the precious metal.

The ICE Dollar Index, which measures the greenback’s strength against a basket of six major currencies, fell 1.3 percent on Wednesday, while the yield on the 10-year U.S. Treasury note slipped to 2.76 percent.

“Gold showed an interesting reaction to the US CPI report,” noted FxPro senior market analyst Alex Kuptsikevich in a MarketWatch commentary, noting that after initial bullish momentum, “easily explained by the fall in the dollar and increasing demand for riskier assets,” gold flirted with a drop below $1,800.

“This momentum proves once again how determinedly the bears are defending this level. It is not only an important level but also the support level since the beginning of the year,” he said.

However, the positive sentiment created for gold was somewhat overshadowed by the downward revision of the precious metal’s outlook by analysts at Goldman Sachs, citing the Fed’s concerns about high inflation on the one hand and the weakening of its growth rate American economy on the other.

The investment bank significantly cut its price targets for the metal over the next quarter, six months and twelve months to $1,850, $1,950 and $1,950 an ounce, from $2,100, $2,300 and $2,500 respectively previously expected.

Goldman Sachs also cut its price targets for silver from $30 an ounce to $21, $23 and $25 an ounce for the next quarter, six months and twelve months.

“While we expected nominal rates to rise due to the Fed, we did not expect inflation expectations to fall this much after the collapse of the pass-through inflation narrative and signs of high inflation persisting,” Goldman strategists said in a note. on Tuesday.

“The bottom line is that in the current environment of monetary tightening and persistent recession concerns, gold’s direction will be determined by the divergence in the Fed’s priorities on fighting inflation and supporting growth,” the investment bank’s analysts explained .

Thus, on Wednesday, the December gold contract recorded a sharp fluctuation moving in a range above $20, with a daily low of $1,803 and a high of $1,824.60, before finally closing at $1,814.10, with gains of 1 $.90 or 0.1%.

Silver also moved higher, with the contract for September delivery up 24 cents, or 1.2%, to settle at $20.74 an ounce.

The rest of the metals also closed with gains. Palladium for September delivery rose $25.20, or 1.1%, to settle at $2,245 an ounce today, the October platinum contract gained $9.60, or 1%, to end at $942.70 an ounce, while copper for September delivery rose 1.2% to close at $3.65 a pound.

Source: Capital

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