Investors await monthly US inflation data for clues to the future of the Fed’s monetary policy. US Treasury rates continue to rise. In this environment, the gold price fell slightly on Friday. Also, it is on a bearish path on a weekly basis. However, some analysts are predicting further declines for the yellow metal.
“Gold price may decline to $1,800 if US CPI is strong”
Spot gold price fell 0.37% to $1,841.17 at the time of writing. U.S. gold futures, on the other hand, were last down 0.39% at $1,846. Meanwhile, benchmark US 10-year Treasury rates rose. This uptrend hurts the demand for zero-yield gold through the inverse correlation effect. On the other hand, geopolitical risks such as the invasion of Ukraine act as a support for the gold price.
US consumer price index (CPI) data will be released later in the day. As it is known, US inflation reached the highest levels of the last forty years in March. Market participants now anxiously await confirmation that inflation has reached its peak. In this context, Stephen Innes, managing partner of SPI Asset Management, makes the following assessment:
Key US CPI data will come tonight. This data may significantly affect the US Federal Reserve after September. Prior to these events, the gold market is in consolidation mode. As reported by
Kriptokoin.com , the gold price has dropped by about 0.3% this week. Stephen Innes thinks that a strong CPI data will point to a more aggressive Fed. He also states that bullion prices are testing $1,825 and strong data could push gold as low as $1,800. However, he notes that a benign data can have the opposite effect.
ANZ Research: These got the gold market shine
A Reuters poll of some economists see no pause in rate hikes until next year. These economists expect the Fed to raise the key interest rate by 50 basis points in June and July. Also, the chances of the Fed making a similar move in September are increasing.
Investors often see the yellow metal as a hedge against inflation. But when the Fed raises short-term interest rates to fight inflation, the opportunity cost of holding it is higher. ANZ Research highlights the following in a note:
Falcon central banks took the glare of higher real interest rates and a stronger US dollar gold market. The unprecedented withdrawal of financial and monetary support is also putting pressure on sentiment.
