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Gold price expectations amid inflation data

Autor: Tiberiu Porojan
2 min

At the onset of Tuesday’s trading, gold prices aimed to push their gains further, touching $1923.50 per ounce due to a weakening US dollar. Yet, the gains were short-lived, offset by the uptick in US Treasury bond yields, bringing the prices down to $1912.60.

The US Dollar Index (DXY) slipped close to 104.60, though there are indications it might stabilize, given the bolstering US bond yields. Currently, the 10-year US Treasury bond’s yield stands at 4.30%, exerting a downward influence on gold prices in both the immediate and foreseeable future.

In my assessment, the robust economic figures from August have pressed down on gold prices. Despite recent dips in the labor market, we’ve seen a bounce-back with standout reports such as the ISM Services Purchasing Managers’ Index and the initial jobless claims, both surpassing anticipated figures. If such data inconsistencies persist, we could expect more surges in the interest rate.

The forthcoming unveiling of the US Consumer Price Index (CPI) for August is eagerly awaited by investors, primarily due to its significance ahead of the Federal Reserve’s September policy gathering.

This data is poised to shed light on the US inflation landscape, potentially reshaping investor predictions around the US dollar and, by extension, gold’s trading trajectory.

Over the last week, Federal Reserve officials voiced strong endorsement for holding the current interest rate steady on September 20, citing reasons like subdued inflation and a frail job sector.

Nevertheless, the allure of gold may wane if predictions of a robust US dollar by week’s end hold true. The dollar’s strength is likely to encapsulate the prospective interest rate hikes, especially with more encouraging US economic statistics on the horizon.

From this perspective, the investing community has been bracing for a potential interest rate increment of 25 basis points by the Federal Reserve later in the year.

The forecast aligns with a possible rate adjustment in either the November or December sessions, especially considering the Fed’s increasingly assertive stance, which could cap gold’s potential for growth moving forward.