Gold Holds at US$4,400; CPI Eases Pressure for Fed Rate Hike
Gold prices held steady around US$4,400 per troy ounce during Thursday's trading (August 13) after relatively moderate US inflation data alleviated concerns that the Federal Reserve would need to raise interest rates again in the near term.
Gold had previously gained approximately 0.9%, touching a 10-week high, before undergoing a slight correction. CPI data showed US consumer prices rising just 0.1% month-on-month in July, reinforcing indications that inflationary pressures were becoming more contained following the energy price surge caused by the Iran conflict.
These results complemented signs of a weakening US labor market observed the previous week. The combination of inflation failing to reignite and a slowing labor market reduced concerns regarding a potential Fed policy tightening in September.
Markets will now closely monitor upcoming employment and inflation data ahead of the Fed meeting. Investors are also awaiting remarks from Fed Chair Kevin Warsh at the Jackson Hole symposium in late August for further clues regarding the direction of monetary policy.
However, inflation risks have not entirely vanished. A new escalation in the Middle East could drive energy prices back up, particularly if US-Iran efforts to end the conflict and reopen the Strait of Hormuz hit a dead end. A sharp rise in oil prices could potentially revive expectations of a Fed rate hike.
Newsmaker Analysis: Gold's short-term fundamentals are increasingly positive. Prices have broken back above the 100-day moving average and are holding around US$4,408, while the combination of controlled CPI and a weakening labor market gives the Fed room to keep interest rates on hold. Provided the dollar and yields do not surge again, gold has the potential to maintain its momentum toward the US$4,450–US$4,500 range. (gn)
Source: Newsmaker.id
