The announcement of the US Consumer Price Index (CPI) data for May is followed closely by investors in order to measure the level of inflation. Inflation data plays an important role in shaping the direction of the economy and provides critical information to investors. US inflation data is scheduled to be released on Tuesday, June 13, 2023 at 15:30. So how can this affect Bitcoin and gold? Here are the details about the US inflation data and market expectations…
US inflation data eagerly awaited
Global economies are currently grappling with the dilemma of inflation and recession, and expectations are rising that the “hawk” monetary policies aimed at curbing inflation may be nearing its end. Market expectations point to an 84% probability that the Fed’s policy rate will be held steady during the Federal Open Market Committee (FOMC) meeting, which starts today and ends tomorrow. Meanwhile, in the USA, the focus of investors is the inflation data that will be announced today. Market expectations are that the Consumer Price Index (CPI), which was 4.9% in April, will decline to 4.1% in May. In addition to the data release, it is predicted that volatility in asset prices may increase.
Gold price edged up slightly on Tuesday, taking advantage of the weakening US dollar. However, prices remained in a tight range as traders await US inflation data and the much-anticipated policy decision from the FED. Spot gold rose 0.3 percent to $1,961.79 an ounce, while U.S. futures rose 0.3 percent to $1,975.90 an ounce. The 0.3% decline in the US dollar makes gold priced in dollars more attractive to overseas buyers. Michael Langford, director of corporate consulting firm AirGuide, said:
The market is waiting for the US Consumer Price Index (CPI) and FED Monetary Policy Committee (FOMC) meeting to give a clearer direction to the gold price. However, there is a lack of catalyst for gold to outperform other asset classes regardless of the Fed’s policy decisions.
There is a pullback expectation.
Gold is often seen as a hedge against inflation. This means that higher interest rates aimed at reining in inflation reduce the attractiveness of the typically non-yielding asset. ANZ, a financial services company, stated that physical gold demand in China is declining due to slowing economic growth and a weak demand season. ANZ expects platinum prices to move towards $1,150 an ounce by the end of this year and palladium to hover around $1,420 an ounce.
Regarding the technical outlook for gold, if the price surpasses the $1,973 zone and decisively clears the $1,983-1,985 supply zone, it could trigger a short-term recovery and potentially push the price towards the psychological level of $2,000. On the downside, if there is a significant decline, the 100-day Simple Moving Average (SMA) around $1,942-1,941 is likely to provide good support.
Bitcoin has experienced some volatility
BTC remained below the $26,000 threshold after briefly surpassing Monday morning. It then broke above that level again and is up 0.7 percent at the time of writing, changing hands at $26,140. The drop below $26,000 came after the US Securities and Exchange Commission (SEC) filed lawsuits against major crypto exchange platforms Binance and Coinbase, and continued concerns over the US central bank’s monetary policy to combat inflation. That’s why investors are now watching closely the May Consumer Price Index (CPI) announcement on 13 June and the FED’s interest rate decision the next day.
Edward Moya, senior market analyst at foreign exchange market maker Oanda, stated that the cryptocurrency market is currently in limbo due to regulatory fears and some investors leaving some major exchanges. He added that mainstream adoption for crypto will not happen with decentralized finance (DeFi) and although experienced crypto traders are moving more of their trading volumes to DeFi, this does not bode well for long-term growth and attracting new investors. Moya stated that before the CPI report and the Fed decision, Bitcoin had significant support around $25,400.
The performance of cryptocurrencies differed from the major US stock indexes that posted gains. The S&P 500 rose 0.9% to its highest level in a year, while the technology-heavy Nasdaq rose 1.5% and the Dow Jones Industrial Average rose 0.5%. The yield on the 10-year Treasury bond also rose to 3.73%. Gold, which has shown similar trading patterns to cryptoassets in the past, fell 0.2%. Strahinja Savic, head of data and analytics at Toronto-based crypto platform FRNT Financial, noted last week that coins affected by SEC actions are underperforming. As the release of US inflation data approaches, investors will be watching closely the numbers and the FED’s subsequent actions, which could significantly affect both gold and Bitcoin prices.
