US inflation came in below expectations in July. However, inflation is still close to the highest annual levels in forty years at 8.5%. Gold price rose after inflation remained below consensus forecasts.
The highly anticipated US CPI fell short of expectations
cryptocoin.com As you follow, the US Consumer Price Index (CPI) came in at 8.5% in July. Therefore, it fell short of the market expectation of 8.7%. The latest data follows the 9.1% annual gain in June. The US Department of Labor said on Wednesday that the monthly headline figure was unchanged from last month, after gaining 1.3% in June. The flat figure was due to the 7.7% decline in gasoline prices, which offset increases in other sectors.
On the other hand, core inflation, which excludes variable food and energy costs, accelerated by 5.9% compared to a year ago. Somewhat surprisingly, it maintained the pace in June. The monthly increase was 0.3%, below the expectations of the markets. The biggest price drop was in the energy sector, down 4.6% month on month. The Ministry of Labor gave the following details in the statement:
Gasoline index fell 7.7 percent in July. It balanced the increases in the food and shelter indices, causing the all items index to remain unchanged throughout the month. The energy index fell 4.6% in the month, but the electricity index increased. The food index continued to rise.
Gold price rose after inflation data
In an immediate reaction to the data, gold jumped to a fresh daily top of $1,824. At the time of this writing, December Comex gold futures were trading at $1,816.90, up 0.25% on the day. CPI data for July was the most anticipated release of the week as markets sought to gauge how aggressive the Federal Reserve could be at its September meeting.
According to some analysts, the price slowdown in July isn’t meaningful enough for the Fed to start slowing the tightening cycle just yet. Paul Ashworth, chief US economist at Capital Economics, comments:
Headline inflation is still 8.5%. In addition, core inflation is 5.9%. In this case, the significant decrease in inflation that the Fed is looking for has not occurred yet. However, this is a start. We expect to see broader signs of easing price pressures over the next few months.
“Gold price is rising, but there is a risk of price reversal”
TD Securities analysts say the slowdown in inflation for gold could trigger significant purchases. However, he notes that there is still a risk of price reversal. Analysts make the following statement:
After all, prop traders still hold large amounts of indifferent longs. This makes us think that we have not seen capitulation under it yet. This is a sign that the bitter trading continues to be bearish. However, it is possible for gold to trade higher before macro winds weigh on the yellow metal once again.
Jim Wyckoff looks at the technical outlook for gold
The gold price rose modestly after the US inflation report. The US dollar index (DXY) fell sharply. In addition, US Treasury rates also fell. Gold price initially rose to a four-week high on these developments. However, bond yields later rose again. Meanwhile, US stock indexes soared amid “risky” trader attitudes trying to push safe-haven metals down from higher levels. Among these developments, senior analyst Jim Wyckoff says the following regarding the technical outlook for gold:
October futures gold generally has a short-term technical advantage. However, there is an incipient price uptrend on the daily bar chart to show that a market bottom is in place. The bulls’ next upside price target is to produce a close above solid resistance at $1,850.00. The bears’ next short-term bearish price target is to push futures prices below solid technical support at the July low of $1,686.30.
The analyst also gives the following technical levels. Initial resistance is seen at today’s high at $1,814.40 followed by $1,825.00. Initial support holds Tuesday’s low at $1,788.50, followed by this week’s low at $1,776.20.
