Market participants, analysts and economists are eagerly awaiting tomorrow’s US Consumer Price Index report for July, which will be released at 8:30 am EDT. Expectations are that tomorrow’s report will show a partial reduction in “core” inflation (which includes energy and food). The slight decline is expected to show CPI inflation coming in at 8.7% to 8.8%, down 0.3% from June’s CPI, which showed inflation at 41 -annual peak of 9.1%.
That being said, even if the report is around economists’ forecast, it will not significantly affect the Federal Reserve’s actions at the next FOMC meeting, which will be held on September 20-21. According to CME’s FedWatch tool, there is a 69.5% chance the Federal Reserve will initiate its third consecutive rate hike of 75 basis points and a 30.5% chance the Fed will raise rates by 50 basis points.
The likelihood that the Fed will implement a third straight hike of 75 basis points in September has doubled in the past month. On July 8, 2022, CME’s FedWatch tool predicted a 31.4% chance of a ¾% rate hike in September. Just last week on August 2, the FedWatch tool predicted that there would be a 41% probability.
The dollar has seen a slight decline in the last two trading days. Today, the dollar index is fixed at 106.195, down 0.12%. At the same time, gold futures posted significant gains, but dollar weakness was not the driving force. Yesterday, gold opened at its 50-day moving average of $1,790.40 and closed above the key psychological level of $1,800 at $1,804.40, up just under $14 on the day.
As of 4:23 PM EDT, benchmark gold futures the most active December contract settled at $1,811.50 after posting a gain of $6.30 (0.34%). The dollar’s weakness over the past two days played only a minimal role in gold’s rise. Rather, market participants bidding higher for the precious yellow metal are responsible for most of the gains this week.
The same minimal effect of dollar weakness can be seen in spot gold pricing through the eyes of the KGX (Kitco Gold Index), which currently has physical gold at $1,794.90 an ounce, up $5.70 on the day. As with gold futures, most of the gains were directly attributable to normal trading, bidding gold higher by $4.30. An additional $1.40 was added due to dollar weakness.
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Disclaimer: The opinions expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is for informational purposes only. This is not an invitation to exchange goods, securities or other financial instruments. Kitco Metals Inc. and the author of this article accept no liability for loss and/or damage arising from the use of this publication.
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