Gold prices skyrocketed sharply during Thursday’s North American session after the release of the Consumer Price Index (CPI) in the United States opened the door for the Federal Reserve (Fed) to lower borrowing costs. Hence, US Treasury yields tanked, a tailwind for the precious metal. The XAU/USD trades at $2,414, up more than 1.80% after bouncing off daily lows of $2,371.
Market sentiment shifted sour as the S&P 500 and the Nasdaq 100 sank sharply, while the Dow Jones Industrial advanced. US yields are collapsing with the 10-year Treasury note yield down 10 basis points to 4.187%.
Data from the US Bureau of Labor Statistics (BLS) revealed that consumer prices deflated in June. Excluding volatile items like food and energy, the so-called core dipped as well, reigniting hopes that the Fed could cut rates in 2024.
The CME FedWatch Tool shows 85% odds for a quarter-point percentage rate cut in September, up from Wednesday’s 70% chances.
The December 2024 fed funds rate futures contract implies that the Fed will ease policy by 49 basis points (bps) toward the end of the year, up from 39 a day ago.
Other data showed the labor market remains robust as the number of Americans filing for unemployment benefits missed the consensus and came in lower than the previous reading.
Today's US data presents a balanced Goldilocks scenario: inflation is decreasing while employment remains strong, with no signs of an impending recession.
Meanwhile, the US Dollar Index (DXY), which tracks the value of a basket of six currencies against the US Dollar, plummeted more than 0.40% and is down at 104.48.
Ahead of the week, the US economic schedule will feature the Producer Price Index (PPI) for June and the University of Michigan Consumer Sentiment survey for the same period.
Gold price resumed its aggressive uptrend and decisively broke the Head-and-Shoulders neckline, invalidating the chart pattern and opening the door for higher prices. Momentum remains on the buyers' side, with the Relative Strength Index (RSI) finally showing signs of direction, trending up.
That said, the path of least resistance is to the upside. The XAU/USD first resistance would be the year-to-date high of $2,450, ahead of the $2,500 mark. Conversely, if Gold slides below the $2,400 figure, the next demand zone will be the July 5 high at $2,392. If cleared, XAU/USD would continue to $2,350
Inflationary or deflationary tendencies are measured by periodically summing the prices of a basket of representative goods and services and presenting the data as The Consumer Price Index (CPI). CPI data is compiled on a monthly basis and released by the US Department of Labor Statistics. The MoM figure compares the prices of goods in the reference month to the previous month.The CPI is a key indicator to measure inflation and changes in purchasing trends. Generally, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.
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Last release: Thu Jul 11, 2024 12:30
Frequency: Monthly
Actual: -0.1%
Consensus: 0.1%
Previous: 0%
Source: US Bureau of Labor Statistics