Gold price seeking key move despite US CPI

The price of gold is seen under pressure as investors turn their attention to digest the most recent US inflation data due to worries that increase the chance of a last interest rate hike by the US central bank in the remaining months of 2023 could result from upside risks to headline CPI.

Although the US economy may avoid recession, increasing interest rates may make things worse. The Consumer Price Index for August was somewhat hotter than expected, rising at a 0.6% annual rate, as expected by market participants, according to data from the US Bureau of Labour Statistics.

Compared to expectations and the 0.2% print from July, the core CPI, which includes volatile energy and food costs, increased by 0.3%. Market players are concerned that upside risks to headline inflation may increase the probability of the Federal Reserve making one more interest rate hike in the remaining months of the year.

Because more tightening in monetary policy is anticipated from the US central bank, it is also anticipated that the US economy will suffer as a result. The US labour market is growing steadily, but that sort to stability could be threatened as businesses try to cut their costs in order that they can increase efficiency. The important support level of $1,910.00 has been tested by the gold price after the US inflation statistics for August came in higher than expected. At the time of writing, the precious metal is trading at $1,910.66 per ounce.

In the US, the headline CPI increased to 3.7% versus 3.6% expected and 3.2% in July. Core CPI slowed down to 4.3% as expected from 4.7% recorded a month earlier.

Since global oil prices have increased by as much as 40% since May on expectations of rising demand for oil in the future months, a sharp rise in petrol costs has raised the possibility of an increase in overall inflation outlook.

The rise in the headline CPI would affect households’ actual income and could raise prices for products and services at factory gates, so Fed policymakers would not ignore it.

Interest rates are predicted by traders to have a 93% chance of remaining unchanged in September at 5.25–5.50%, and a nearly 55% chance of the Fed maintaining its current monetary policy throughout the remainder of the year.

Interest rates are predicted by traders to stay between 5.25% and 5.50% in September with a 93% probability. Traders predict that the Fed will maintain its current monetary policy for the remainder of the year with a probability of roughly 55%.

Due to the upside risks that higher interest rates pose to corporate performance and the resulting risk-off profile, investors are nonetheless concerned about US equities.