Gold price extends recovery ahead of inflation data

NEW YORK (August 10) Gold price (XAU/USD) discovered an intermediate cushion after printing a fresh monthly low on Thursday. The precious metal remains on tenterhooks as forward action will be guided by the pace of inflation in the July US Consumer Price Index (CPI) data on inflation. Gold price doesn’t find meaningful support despite a decline in the US Dollar. It seems that the impact of falling demand from central banks is intact.

United States inflation data for July is expected to provide meaningful cues about September’s monetary policy by the Federal Reserve (Fed). Signs of persistence in inflation data would elevate hopes of a hawkish interest rate decision by the Fed. Meanwhile, consumer sentiment could come under pressure as mortgage rates rose to a fresh high at 7.09% this week.

Daily Digest Market Movers: Gold price maintains modest rebound ahead of US CPI

• Gold price finds buying interest after printing a fresh monthly low around $1,915.00 ahead of the US CPI data for July, which will be released at 12:30 GMT.
• July’s inflation data might set a base for September’s monetary policy from the Federal Reserve (Fed) as the economic data could turn out persistent after a long softening spell.
• Gasoline prices saw a modest recovery last month, which could influence a rebound in headline inflation. Apart from that, Q2 Gross Domestic Product (GDP) and June’s Consumer Spending outperformed expectations. They may be sufficient to keep core inflation sticky.
• Per estimates, monthly headline and core CPI should expand at a steady pace of 0.2%. Annual headline inflation is forecast to rebound to 3.3%, and core CPI is expected to remain stubborn at 4.8%.
• Persistent inflation data might force Fed policymakers’ hand: Philadelphia Fed Bank President Patrick Harker and New York Fed President John Williams to change their neutral stance for September monetary policy.
• On the contrary, Fed Governor Michelle Bowman remained hawkish over interest rate guidance amid tight labor market conditions.
• After inflation data, investors would shift their focus on the Producer Price Index (PPI) for July, which will be published on Friday at 12:30 GMT.
• This week, global markets reacted strongly to the US government’s long-term debt rating downgrade by Fitch.
• Chicago Fed President Austan D. Goolsbee commented that Fitch’s downgrade won’t make any difference. However, the US 30-year mortgage rate jumped to a nine-month peak at 7.09%.
• Joel Kan, the Mortgage Bankers Association's vice president, and deputy chief economist, pointed to Fitch's recent downgrading of U.S. government debt, which affected all types of loans on the weekly survey, Reuters reported.
• The US Dollar Index (DXY) faces a severe sell-off after retreating from 102.50 as investors believe that a 0.2% monthly expansion pace in inflation is in line with the Fed’s desired core rate of 2%.
• On Wednesday, Moody’s downgraded the credit rating of several small and mid-sized banks as higher borrowing costs could impact their funding strength and profitability. The credit-rating firm also warned that it might also downgrade some of the biggest lenders ahead.
• New York Fed said in its latest quarterly household debt and credit report that households increased their borrowing to its highest-ever level of $45 billion in the second quarter at $1.03 trillion. Credit card delinquencies rose to an 11-year high.

Technical Analysis: Gold price rebounds from monthly low

Gold price finds temporary support near the fresh monthly low of $1,916. The precious metal looks vulnerable and is expected to continue its downside move. After remaining consistently below the 20 and 50-day Exponential Moving Averages (EMAs), the yellow metal is declining toward the 200-day EMA around $1,907.00. Momentum oscillators are near the support region and a further downside would trigger a bearish impulse.

FXStreet