12/09/24

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Gold prices experienced a decline following the release of the important U.S. Consumer Price Index (CPI) report on Wednesday. This report lessened expectations for a significant 50-basis-point interest rate cut from the Federal Reserve in September, resulting in increased U.S. bond yields and strength in the U.S. dollar. However, prospects for an eventual easing of the Fed’s policy provided some support for gold, which briefly bounced off the psychological level of $2,500 after pulling back from its recent peak.

Investor sentiment has shifted, with expectations now leaning toward a 25-basis-point reduction at each of the remaining three Federal Open Market Committee meetings in 2024. This optimism has, in part, buoyed gold prices during Thursday’s Asian trading session, although gains remain limited amid rising dollar demand and increasing Treasury bond yields. The gold market appears to be trapped within a prolonged trading range, indicating a cautious outlook for traders seeking to establish significant positions in the short term.

The U.S. Bureau of Labor Statistics reported a modest 0.2% increase in headline CPI for August, with the annual rate slowing to 2.5%, marking its lowest growth since February 2021. The core CPI, which excludes food and energy prices, rose by 0.3% in August and matched market predictions, contributing to the mixed sentiment in the market. The latest data prompted a recalibration of interest rate cut expectations, with a significant majority now anticipating a smaller cut at the upcoming Federal Reserve meeting.

Technically speaking, gold’s recent trading behavior has formed a rectangle on short-term charts, suggesting a phase of bullish consolidation following a rally that began in June. The current conditions call for caution, as mixed indicators on the daily chart signal a potential need for a breakout before making further investments in a specific direction. Resistance may emerge near the $2,530 to $2,532 levels, where previous highs have been recorded. Conversely, should prices slip below $2,500, support may be found around $2,485 and the $2,470 range, marking the lower end of the trading spectrum. A substantial drop below this support could trigger further selling pressure, with potential targets toward the 50-day Simple Moving Average in the vicinity of $2,452.