How did the US inflation data affect the gold market?

Books – Islam Saeed

Thursday, September 14, 2023 at 12:00 AM

With the release of the much-awaited US inflation data for the month of August, the… Gold price As the data carries signals of the Federal Reserve’s interest rates in the coming period, the global stock market is significantly lower.

The consumer price index showed a 0.6% increase in August, in line with expectations but higher than the previous reading, which was 0.2% higher. The index rose 3.7% year-on-year from the previous. Reading was 3.2% and expectations were 3.6%.

As for the core index, which excludes volatile gauges such as fuel and food, it showed a 0.3% increase, beating expectations and the previous reading of 0.2%, while it fell to 4.3% year-on-year. The previous reading was 4.7%.

Inflation in August was mainly driven by fuel prices, as crude oil prices continued to rise since last June, increasing pressure on inflation rates, which could push the Federal Bank to adopt a tighter monetary policy. At the end of the year, according to Goldbillion’s analytical view of the US inflation index.

Market expectations place a 96% probability that the Federal Reserve will seek to keep interest rates unchanged at its next meeting, up from 93% before the inflation data, while the probability of a 25 basis point hike in interest rates fell to 39.2% after the November meeting… Inflation Before statistics it was 41%.

Inflation data revealed that inflation in the U.S. is still steady despite the interest rate hike cycle that began in March 2022, which will prompt the U.S. Federal Reserve to maintain its fight against inflation and pursue monetary tightening until the end. Even if interest rate hikes are held off at the annual meeting, there is a possibility of raising rates at the September/November meeting or keeping them higher for longer than expected.

The immediate impact of the data pushed global gold prices to a record low of $1,905 an ounce in two weeks.

The reason behind the rise in gold prices despite the data having a negative impact on gold is that gold markets had already priced in the data and even the US dollar saw an immediate rise during the release of the data. The dollar index rose as high as 104.96 before declining and trading back to 104.58.

As for gold prices in the local market, the impact of inflation data on it was largely weak as gold prices continued to trade in the range of 2200 – 2195 pounds per 21 carat gram as gold prices globally did not move in a consistent direction and witnessed fluctuations.