The price of gold is consolidating near the recent all-time highs and awaits a catalyst.
XAUUSD – Daily Chart
The price of gold is still consolidating above an uptrend resistance line and is caught in a range between $2,258 and $2,477.
Gold has been rallying recently on slower inflation and the expectation for a Federal Reserve rate cut starting. US BLS CPI data revealed that headline inflation for August dipped to 2.5% year-over-year, from 2.9%, and below the 2.6% forecast.
However, US core CPI, which excludes volatile items and is considered to be a more accurate gauge of prices, remained unchanged at 3.2%. On a monthly basis, core CPI rose from 0.2% to 0.3%, while headline CPI stood at 0.2% MoM.
Data from the Chicago Board of Trade now sees the Fed cutting at least 98 basis points this year. Last week, Fed officials were dovish with New York Fed President John Williams saying that cutting rates will help to balance the jobs market. Governor Christopher Waller said that “the time has come” to ease rates.
Chicago Fed President Austan Goolsbee was also dovish, saying policymakers have an “overwhelming” consensus to now cut rates. Markets will now look at the important services PMI figures for the US. A weak number could reignite recession fears.
That will then put a big focus on the latest jobs numbers with the country seeing a recent downgrade of previous job additions. The market is expecting to see 160k jobs added to the economy, after a 114k print last month.
Domestic buying may slow in gold with the World Gold Council saying that domestic prices have risen by 10% with the rally in bullion. Domestic had been trading at a discount to international prices for five consecutive months, but are now at a premium
World Gold Council CEO David Tait said recently he sees no signs of a gold bubble.
“I can’t see anything on the rise at the moment that will burst the gold bubble, shall we say. I honestly believe that we are in a rather unique situation where we have the classic geopolitical problems. You’ve got the debt burden, which as I’ve mentioned, and then you’ve got central banks all wanting to add to reserves for a variety of reasons. It’s hard to imagine a situation unless peace breaks out tomorrow that gold does not continue”.
The WGC said Western buying was leading the way in its August Gold Inflows report. Global gold ETFs marked inflows for a fourth-consecutive month. North America saw inflows for a second month in a row, adding US$1.4bn in August. European funds added $362 million.
