The gold price has made a retreat to the vicinity of $1,900 per ounce. What's next for gold prices - will the King of Metals find support there from which to bounce?
Please comment on the US CPI reading. What does it mean in terms of further Fed monetary policy?
Today’s US CPI numbers for June were never likely to change the calculus behind another 25bps rate hike when the Fed meets in two weeks’ time. Having hit a peak of 9.1% this time last year, today’s numbers have seen US CPI slow further to 3%, while core CPI slowed to 4.8%, a much softer number than expected. The nature of today’s figures suggest that whatever other Fed officials would have us believe further rate hikes beyond July will be a big ask, and probably won’t happen, hence today’s US dollar weakness.
This may also help to explain why the US dollar has slipped so much against the Japanese yen in recent days, although some are suggesting it is because we might see a policy shift from the Bank of Japan when it meets at the end of this month. Whichever way you come at it from the net effect is likely to be the same in that US and Japanese rates are likely to converge, rather than diverge.
This should be good news for gold as a weaker US dollar should help lift the yellow metal back towards $2,000 an ounce
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