Gold prices fall as markets prepare for key U.S. inflation data, potential interest rate decisions
Date
8/14/2024 4:45:44 AM
(MENAFN) Gold prices edged lower on Wednesday as investors adopted a cautious stance ahead of critical U.S. inflation data that could influence the Federal Reserve's interest rate decisions in September. By 0327 GMT, spot gold had slipped 0.2 percent to USD2,460.87 per ounce, down from its all-time high of USD2,483.60 reached last month. Similarly, U.S. gold futures dropped by 0.3 percent to USD2,500.30. The market is anxiously awaiting the release of the U.S. Consumer Price Index (CPI) data for July, scheduled for 1230 GMT, which is expected to show a modest monthly inflation increase of 0.2 percent, with annual core inflation projected to ease slightly to 3.2 percent. Additionally, retail sales data set to be released on Thursday could further impact market expectations.
Financial market analysts, such as Kyle Rodda from Capital.com, suggest that gold prices could potentially decline to USD2,300 if the CPI data does not align with expectations for a rate cut. However, Rodda also notes that in the longer term, gold is likely to rise as the U.S. economy slows to a pace that might prompt the Federal Reserve to make significant rate cuts. Tuesday's data, which indicated that U.S. producer prices rose less than anticipated in July, has bolstered the market's belief that slowing inflation could soon lead to lower interest rates. According to the CME FedWatch tool, there is currently a 54 percent probability of a 50 basis point rate cut in September, reflecting the market's anticipation of a more favorable environment for gold.
In the broader context, gold continues to be viewed as a hedge against geopolitical risks, particularly in the current low-interest-rate environment. Investors are increasingly turning to gold in anticipation of potential retaliation from Iran, following the assassination of Hamas leader Ismail Haniyeh on Iranian soil. Reports from three senior Iranian officials suggest that a ceasefire agreement in the Gaza Strip, expected to be discussed in talks this week, may be the only way to delay a direct Iranian response to Israel. As geopolitical tensions simmer, gold's allure as a safe-haven asset remains strong, even as short-term price movements are influenced by forthcoming economic data and central bank decisions.
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