After the release of US July CPI data, bearish signals for gold became more apparent.
On Thursday (Aug.11th), the US Bureau of Labor Statistics published the July CPI figures. The YOY growth in July reached 3.2%, slightly higher than June's 3%. However, this increase fell below market expectations of 3.3%. The YOY increase in core CPI was 4.7%, showing a decline from previous and expected values, reaching its lowest level since October 2021. The rise in core CPI was mainly driven by increased housing costs, followed by car insurance and education, while the decline in airfare, used cars, and healthcare prices partially alleviated inflationary pressures.
Initial jobless claims data also became a market focus, with last week's initial jobless claims exceeding expectations at 248,000, compared to the anticipated 230,000. Following the report's release, US bond yields experienced significant volatility, and the already declining US dollar index further fluctuated downwards. Spot gold prices briefly rose to $1930 but quickly retraced, ultimately closing at $1912.
Some analysts believe that while US inflation has shown a trend of sustained moderation in recent months, the YOY inflation level remains higher than the Fed's 2% target.
Furthermore, according to CME's FedWatch, the probability of the Fed maintaining the benchmark interest rate at 5.25%-5.50% in September is 89%, while the probability of a 25 BP rate hike to the 5.50%-5.75% range is 11%. In November, the probability of keeping rates unchanged is 69.8%, while the cumulative probability of a 25 BP rate hike is 27.8%. Since initiating the rate hike process in March of last year, the Fed has already raised rates by a cumulative 525 BP, bringing the policy rate within the target range of 5.25%-5.50%.
Source: CME
Following the release of US CPI data, gold prices declined, and with long-term US bond yields outperforming short-term rates, there is an expectation that the Fed will maintain relatively high interest rates for a prolonged period. This poses a significant resistance to any rebound in gold prices.
From a technical perspective, the current upward trend in gold has reversed, with gold fluctuating around $1910-$1915 and a higher possibility of testing the 200-day MA of $1900. Resistance levels are at $1930 and $1986.
Source: Mitrade
