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On August 12th, JPMorgan Asset Managements chief global strategist stated that the Federal Reserve should maintain interest rates and expects inflation to gradually decline as increasing evidence suggests a persistent wage-price spiral will not form. David Kelly, speaking after the release of the July Consumer Price Index, said, "The Fed should absolutely hold off, and I actually think they will." The report showed that core inflation in the US remained moderate in July, and US Treasury bonds continued their upward trend after the news was released. Kelly pointed out that three forces are working together to significantly cool inflation: tariff costs will decline year-on-year; oil prices will fall as markets become optimistic that the Iran war will end; and wage growth continues to lag behind inflation. He added that the last point weakens the momentum needed for price pressures to form a self-reinforcing cycle, meaning the Fed doesnt need to raise interest rates to curb inflation. Kelly noted that financial markets are currently highly leveraged, and even a small rate hike could trigger asset repricing.Ukraines Deputy Minister of Infrastructure stated that due to escalating Russian attacks, only 159 ships entered the Odessa port hub for loading in July, compared to nearly 400 during the same period last year.Israeli Defense Minister Katz: The Israel Defense Forces will continue to be stationed in the security zones of Lebanon, Syria, and Gaza.Russian Defense Ministry: Russia struck a ship in the port of Odessa.Texas Governor: CleanSpark will comply with data center standards.

Forecast for the price of gold: XAU/USD eases below the $1,804 barrier as Fed hawks back off due to weaker US inflation

Alina Haynes

Aug 11, 2022 11:58

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US inflation-driven gains in the price of gold (XAU/USD) are fading as the metal declines to $1,790 on Thursday during the opening Tokyo session. The recent decline in the price of precious metals may be related to conflicting worries about the US Federal Reserve's (Fed) upcoming actions as well as Sino-American friction.

 

On Wednesday, the US Consumer Price Index (CPI) fell to 8.5% YoY in July, below the 8.7% consensus and the 9.1% reading from June. According to Reuters, US President Joe Biden stated on Wednesday that there are some indications that inflation may be decreasing after the US released its inflation data. In the coming months, there may be more challenges for us to overcome, Biden continued. US President Biden continues, "We still have work to do, but we're on track."

 

Following the CPI report on Wednesday, traders of futures linked to the Fed's benchmark interest rate reduced their bets on a third consecutive 75-basis-point raise at its policy meeting on September 20-21 and now see a half-point increase as the most likely scenario, according to Reuters.

 

Neel Kashkari, president of the Minneapolis Fed, recently stated that the Fed is "far, far away from declaring success" on inflation. Additionally, the decision-maker stated that he hasn't "seen anything that changes" the need for the Fed to raise its policy rate to 3.9% by year's end and to 4.4% by the end of 2023. Charles Evans, president of the Chicago Fed, said in another place that a recession would likely require unfavorable circumstances to occur. Also labeling inflation "unacceptably" high, Fed's Evans

 

Additionally, according to sources cited by Reuters, US President Biden is reconsidering his China tariff policy in light of Taiwan's response, which put the XAU/USD bulls on the defensive.

 

S&P 500 Futures print modest gains near 4,220 by press time against this backdrop after Wall Street rose and US Treasury yields were largely unchanged the day prior.

 

Moving on, the monthly Producer Price Index (PPI) for July and the weekly US Jobless Claims numbers may amuse gold traders. However, in light of recent risk-negative headlines, special focus should be placed on the qualitative variables.

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