Title: Gold Prices Hit Lowest in Nearly a Month as Investors Await US Inflation Report
Publication: Financial News Today
Date: August 10, 2023
On August 10th, gold prices fell to their lowest point in almost a month as investors eagerly awaited the release of the US inflation report. The decline in gold prices comes amidst uncertainty about the Federal Reserve’s monetary policy stance.
According to Daniel Pavilonis, senior market strategist at RJO Futures, the upcoming consumer price index (CPI) will be pivotal in determining the Fed’s policy direction. He stated, “Gold has also been an inflation hedge, but it is fighting an uphill battle against 10-year yields. If inflation persists and the Fed wants to raise interest rates quickly, gold will likely fall.”
The US inflation report, set to be published on Thursday, is expected to show a slight acceleration in inflation in July, with a year-on-year increase of 3.3 percent. Despite this, most traders do not anticipate any changes in September’s policy meeting, with only a 13.5% chance of a 25 basis point rate hike.
In commodities news, oil prices reached multi-month highs on Wednesday. Global benchmark Brent crude futures hit their highest level since January, buoyed by a significant draw in US refined product inventories and production cuts by Saudi Arabia and Russia. Despite concerns about slowing demand, these factors outweighed the worries.
During Wednesday’s trading session, US gold futures settled 0.5% lower at $1,950.60 per ounce. Meanwhile, Brent crude futures settled up 1.6% at $87.55 per barrel, the highest since January, and US crude futures settled up 1.8% at $84.40 per barrel, the highest since November 2022.
In equity markets, the Dow Jones Index closed down 0.54% at 35,123.95 points, the S&P 500 Index closed down 0.68% at 4,468.97 points, and the Nasdaq Composite Index closed down 1.17% at 13,722.02 points.
The dollar also saw a decline on Wednesday as investors awaited the release of the US consumer price report. The dollar index fell 0.1% to 102.46, relinquishing some of its gains from the previous day. Meanwhile, the euro rose 0.2% to $1.0976, while sterling slipped 0.2% to $1.2721.
In other market news, the European energy industry has been sending large quantities of natural gas to Ukraine for storage ahead of the coming winter. This move aims to avoid gas shortages as the European Union reduces its reliance on Russian gas.
European gas prices saw a 20% surge as potential labor strikes in Australian plants posed risks to liquefied natural gas supplies. Additionally, potential delays in seasonal maintenance in Norway added further upward pressure on prices.
A closely watched bond market gauge of expected US inflation is climbing towards a near nine-year high, signaling concerns that the Federal Reserve may continue to grapple with elevated price pressures for years to come. The market’s inflation expectations have not reached a level of significant concern yet, according to experts.
In aviation news, the International Air Transport Association (IATA) reported that total air passenger traffic in the first half of the year increased by 47.2% compared to the same period last year. This significant recovery reflects the ongoing rebound in the aviation industry after the pandemic-induced slump.
Overall, the financial markets are closely watching the US inflation report for insights into the Federal Reserve’s monetary policy stance. The decline in gold prices, alongside rising oil prices, underlines the impact of economic indicators on various sectors.