Gold News

Gold 'Under Pressure' as US Inflation Dip Fails to Cool Fed Rate Forecasts

The GOLD PRICE steadied against a weaker US Dollar on Wednesday, heading into London's afternoon benchmark auction $5 per ounce higher from yesterday as new US data said the underlying rate of inflation in the world's largest economy slowed last month as analysts expected.
While the headline cost of living accelerated 0.5 points from July's pace to show 3.7% annual inflation, the 'core' measure – excluding fuel and food – edged back to 4.4% on a seasonally-adjusted basis, the slowest increase since September 2021.
Betting that the Federal Reserve might raise interest rates again from their current 2-decade high at next week's meeting fell to 5.0% of trader positions according to data from the CME derivatives exchange, barely half the level of this time last month and the lowest since late May.
Back then, gold prices were trading at $1970 per Troy ounce – $60 above today's level – having touched a new spot-market record at $2080 three weeks earlier amid the aftermath of regional US bank failures and the forced takeover of once-giant Swiss bank Credit Suisse by rival UBS. 
But market forecasts for when the Fed will then start to cut US interest rates edged further ahead, with the consensus bet for May 2024 predicting a rate of 5.29% per annum, only just below today's effective Fed Funds rate of 5.33%.
Chart of Fed Funds rate now and as forecast for May 2024. Source: BullionVault via CME FedWatch
"Gold under pressure," says bullion-market analyst Rhona O'Connell at brokerage StoneX of the technical picture, with the 20-day and 200-day moving averages converging as the 10-day average moves above current spot prices.
Like gold, global stock markets also slipped again before the US inflation data, losing value for the 5th of 9 sessions so far in September as giant software and tech brand Apple (Nasdaq: AAPL) extended its retreat from the summer's run of fresh all-time highs, dropping towards late-August's 3-month low after yesterday's much-hyped launch of the iPhone 15.
As a group, tech stocks in the S&P500 index of US corporations have risen 23.7% over the last 12 months. The rest of the index has risen just 3.4%.
UK Gilts meanwhile bucked a wider drop in Western government debt prices, rising to push London's 10-year borrowing cost down to the lowest so far this month at 4.36% per annum after new GDP data said the world's 6th largest economy shrank 0.5 percentage points in July, reversing June's surprise growth.
UK gold prices held near 2-week lows at £1530 per Troy ounce, while Euro gold rallied 0.3% from its cheapest so far this month to trade back at €1781.
The Shanghai gold price – benchmark for China, the precious metal's No.1 consumer nation – had earlier fixed at yet another fresh all-time record, widening the gap to London quotes to almost $100 per Troy ounce, twice the highest level seen prior to this current surge.

Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver, platinum and palladium market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

Follow Us

Facebook Youtube Twitter LinkedIn



Market Fundamentals