Gold’s Near-term Trajectory Tied to CPI Data and Central Bank Decisions
In Tuesday’s Asian trading session, GOLD has witnessed modest dip-buying around the pivotal 200-day Simple Moving Average (SMA), pausing the previous night’s retreat from the $1,930 zone – its highest in four days. Presently, the XAU/USD hovers around $1,923, marking a consecutive day of marginal gains.
However, the momentum lacks clarity as the market’s focus sharpens on the imminent release of the US consumer inflation data set for Wednesday.
The impending US Consumer Price Index (CPI) will offer insights into the Federal Reserve’s prospective rate hike trajectory, especially following the expected hiatus in September. A robust CPI outcome will bolster the market’s sentiment for continued policy tightening by the Fed, potentially leading Gold, a non-interest-bearing asset, into a downturn. It’s noteworthy that the prospects of an additional rate increase of 25 basis points by year-end have gained traction.
This sentiment was bolstered by the previous week’s encouraging US macroeconomic indicators, hinting at a robust economy, allowing the Fed more leeway to sustain elevated interest rates. This optimistic stance amplified US Treasury yields and propelled the US Dollar (USD) to a half-year apex last week. Yet, the USD experienced a pullback on Monday and remained subdued on Tuesday, providing a fillip to GOLD.
Furthermore, apprehensions surrounding the deteriorating economic scenario in China, the globe’s second-largest economy, coupled with the potential pitfalls of escalating borrowing expenses, have dampened the risk sentiment. These factors not only solidify Gold’s position as a safe haven but also drive capital towards it.
However, the trading community appears hesitant to make assertive bullish moves, choosing a more observant stance before the US CPI release. The much-awaited European Central Bank (ECB) conference on Thursday will add another layer to this anticipation.
Analysts are split on predicting if the ECB will persist with its rate hikes, given the ten previous increments, or if it will halt this unprecedented tightening sequence due to the gloomy economic forecast in the Euro Zone.
These pivotal data points and central bank developments will shape the immediate direction for Gold.
Thus, a cautious approach, waiting for a substantial buying surge, seems wise before anticipating any resurgence from Gold’s recent low at the $1,885 mark
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