The US inflation and CPI report yesterday, Tuesday, September 13, 2022, revealed that price pressures in America keep increasing and continuous rate hikes are needed. Yesterday, an inflation rise was shown, on a month-on-month basis, to the surprise of market participants anticipating a move lower.
The market signals a 35% chance of a 100 bp rate hike at the September 21 FOMC meeting.
The market’s increased expectations can be seen in the Two-year US Treasury, which is currently trading with a 15-year high yield of 3.78%. Higher-for-longer Treasury yields will weigh on gold in the months ahead as the Fed will continue to watch it.
Gold is finding support at just under $1,700/oz. The markets believe it’s eyeing a position below the said price. A cluster of prior lows all the way down to $1,667/oz. It will likely stem any sell-off, although this will leave a gap back to the 50% Fibonacci retracement level at $1,618/oz vulnerable. Recent weekly highs at $1,736/oz. and $1,746/oz. should keep a lid on prices in the near term.