September 11, 2024
New Delhi, India
Gold Prices
Gold (XAU/USD) extended its upward move for the third consecutive day on Wednesday, rising from the $2,485 region to reach a fresh weekly high during the early European session. The precious metal is currently hovering around the $2,525-$2,526 supply zone, with bulls looking to build on this momentum.
Key Factors Supporting Gold’s Rally:
- USD Weakness: The US Dollar (USD) struggled to maintain its gains from the past three days and pulled back from its monthly peak. This retreat is primarily due to dovish expectations surrounding the Federal Reserve’s (Fed) future policy, which has driven demand for the non-yielding yellow metal.
- Cautious Market Mood: A weaker risk sentiment has further driven safe-haven flows towards gold, pushing the price closer to its all-time peak. However, traders may be hesitant to place fresh bullish bets ahead of the release of the US Consumer Price Index (CPI) report.
Market Expectations Ahead of US CPI:
The upcoming US CPI report is expected to be pivotal in shaping market expectations for the Fed’s policy stance. The headline CPI is anticipated to show a 0.2% increase in August, with the yearly rate slowing from 2.9% to 2.6%, marking the lowest level since 2021. Meanwhile, the core CPI, which excludes food and energy prices, is expected to hold steady at a 3.2% year-over-year rate.
Impact of CPI Data on Gold Prices:
- Cooling Inflation: Signs of cooling inflation could increase market bets on a more aggressive easing of Fed policy, which would be favorable for gold.
- Stronger CPI Print: If the CPI data shows stronger-than-expected inflation, the reaction might be muted, as the market seems convinced that the Fed will start lowering borrowing costs in September.
Market Positioning for Fed Rate Decision:
According to the CME FedWatch Tool, there is currently a 67% chance of a 25-basis-points rate cut at the upcoming FOMC policy meeting scheduled for September 17-18. This anticipation has led to increased positioning in gold as a safe-haven asset.
Additional Market Influences:
The recent debate between Democratic Vice President Kamala Harris and Republican Presidential candidate Donald Trump did not have a significant impact on market sentiment, leaving the focus on economic data and Fed policy decisions.
Disclaimer:
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