Market Expects Slight Increase in August Core CPI, Will Gold Prices Further Decline?

The upcoming release of the US August core CPI data tonight may further impact the direction of gold.

However, on the eve of the data release, market investors are generally adopting a wait-and-see stance, and gold remains range-bound between $1908 and $1913.

Market expectations suggest that the US August core inflation rate will experience a slight increase. Bloomberg predicts that the US CPI for August will achieve a year-on-year growth rate of 3.6%, higher than July's 3.2%, while the August core CPI is expected to increase by 4.3% year-on-year, lower than July's 4.7%. This expectation is likely to contribute to a rebound in the US dollar, further suppressing gold.

However, recently released economic data and news have not been favorable for a gold rebound, causing gold prices to remain sluggish. These data points include moderate growth in core PCE, better-than-expected non-farm payroll figures, strong ISM Services PMI, moderate economic growth as revealed in the Beige Book, robust consumer demand, cooling employment market demand, and wage growth reaching a new low since early 2022.

The aforementioned economic data suggests a reduced possibility of a hard landing and recession in the US economy, leading to a decrease in safe-haven demand for gold. However, the labor market has shown signs of slowing down, easing inflationary pressures. This indicates that the current urgency for the Federal Reserve to adopt a rate hike policy to cool the economy is not high. While this may not be favorable for a rise in the US dollar, it also implies that the Federal Reserve is likely to maintain its current stance for some time, with a low probability of a rate hike in September (according to CME FedWatch data, the probability of a rate hike in September is 7%, while the probability of keeping rates unchanged is 93%). However, high interest rates are expected to be sustained in the long term, providing support for the US dollar and creating a bearish outlook for gold.

From a technical standpoint, gold has been declining since its rebound near $2080 in May. It has failed to sustain three rebounds and is currently trading below the 200-day MA. This confirms a downward trend, and gold may continue to experience oscillations and decline in the short term. Support levels: $1906, $1885; Resistance levels: $1914, $1924.

Source: Mitrade Webtrader