Gold Finally Finds Support as the USD Slides Lower.

Gold

The gold price finds higher ground ahead of the US CPI on Tuesday as the market expects the data to reveal easing price pressures.

The US CPI for August is expected to be -0.1% against a flat number for July and 8.1% for the year-on-year figure against 8.5% previously.

Month-on-month ex-food and energy CPI is forecast to print the same as the previous month at 0.3%, and the annual read is expected to be 6.1% against the previous 5.9%.

The market remains expectant of a 75 bp hike at the Federal Open Market Committee (FOMC) meeting next week; appraisals of further jumbo lifts have come under question if price pressures continue to ease.

The market’s perception of a cooling CPI has helped equity markets rally and undermine the US Dollar.

After the Fed’s Jackson Hole symposium, where Fed Chair Jerome Powell stated the law on inflation-fighting determination, the US real yields initially lifted, and gold slipped lower simultaneously.

The last few sessions have also witnessed real yields remain quite steady at a time when the US Dollar is pressured. Currently, the weak dollar is having a positive impact on the price of gold.

Should today’s US CPI disappoint expectations, it could ignite a move in real yields, which might flow into gold price movements again. In July and August, gold threatened to break below the March 2021 low of 1677 but pulled up at 1681 and 1689, respectively. If US CPI surprises, Fed responses may change. Will XAU/USD be impacted?

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