Ahead of the release of US CPI data tomorrow, gold prices rose as bond yields and the US dollar weakened. However, the Fed's policy speculation needs to be watched.
Gold continues to rally amid weakening US Treasury bond yields and the US dollar. Spot gold was up 0.5% at $1834.30 an ounce, while gold futures on the Comex in New York were up 0.4% at $1835.10. As of writing Wednesday (09/February) evening, the XAU/USD chart below shows a half percent gain to $1834.66.
The yield on the 10-year US bond has fallen from its high level since December 2019. The US dollar also showed no increase from a one-week low in today's trading session. "The US dollar is slightly down and seems to be a bit of support for gold. However, overall, the gold market is still likely to be flat in anticipation of tomorrow's CPI data," commented Daniel Pavilonis, analyst at RJO Futures.
The market is waiting for US Consumer Inflation (CPI) data to be released tomorrow evening. They hope the data will add clues about the Fed's next steps in raising interest rates.
Strong inflation is expected to make gold prices rise further, but it can also cause weakness. Because, although gold is an anti-inflation asset, its price will also be pressured by the tendency of the central bank to raise interest rates if inflation is high.
Fed's Bostic Expects Four Times Rate Hike
The President of the Atlanta Fed, Raphael Bostic, revealed the possibility of a decline in US inflation. However, interest rates still need to be raised at a rapid pace this year.
"I really hope we'll see that (inflation) drop... There's some evidence that we're already at the peak (inflation) and moving down," Bostic said in an interview with CNBC. "In terms of rate hikes, my current forecast is is three times this year... I'm also slightly leaning towards four (rate hikes), but we need to see how the economy responds when it takes its first (rate hike) steps earlier this year."
Technically, ThinkMarkets analyst Fawad Razaqzada said that if gold prices want to regain their feet, it must confirm it has reached key resistance at $1830-$1850.
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