The precious metal gold faced some rejection after reaching $1,807 on Wednesday, following the slow down in the US inflation rate from the CPI report. The US inflation rate reduced to 8.5% YoY from its previous record of 9.1% in June.
The US inflation rate hopes the Fed will likely slow down in its pace of hiking the interest rate during their next session in September. Hence, gold prices were pushed higher on Wednesday surpassing $1,800 after the news.
President of the Federal Reserve Bank of San Francisco mentioned she remains open to a 75 basis points interest rate hike during the next Fed session in September. Fed President of Minneapolis added that he sees nothing so impressive from the report to change the need for raising the Fed's policy rate to 3.9% by year-end and 4.4% by the end of 2023. He considered the inflation rate as still high, suggesting the need for a repeat of a 75 basis point hike in September. These remarks have caused the bulls to consider taking profits on gold and other commodities after the relief bounce on Wednesday.
Gold traders are waiting to receive the report from the University of Michigan (UoM) Consumers' Sentiment to know how the general consumers feel about the US economy. This will determine if the bulls are to subdue the creeping fears of another aggressive interest rate hike in September or a part way for the bears to take over.
The Prelim UoM Consumer Sentiment report is usually a composite index of Consumers Sentiment toward the US economy. This data is obtained by surveying about 500 consumers who the surveyors asked to give their feelings towards the US economy and rate the current economic conditions and the future.
The outcome of this report will affect not just gold alone but other commodities too, especially Silver (XAGUSD) and Oil (Brent and WTI) prices.
Gold and other commodities constantly move in the same direction and are grossly influenced by the prevailing market sentiment.
Silver, just like gold, witnessed a massive bullish trend on Wednesday after the release of the inflation report. XAGUSD initially jumped to $20.81 before succumbing to the current retracement, bringing the price down to $20.28 during the Asian session today.
Crude oil (WTI) also rose from $86.50 last week to $94.22 yesterday. Likewise, Brent jumped from $92.42 to $99.26.
These three commodities are losing their bullish momentum again as the market awaits the Prelim UoM Consumer Sentiment report today.
How will the Prelim UoM Consumer Sentiment report affect these three commodities today?
Commodities are primarily moved by market sentiment. This is understandable as we often find people buying products in the market today based on how they feel about them or what others say to them concerning them. The three major forex commodities are no exception to this fact also. The Prelim UoM Consumer Sentiment report today will exert significant pressure on gold, silver, and crude oil in the forex market, depending on the outcome of this report.
Higher reading from this report which signifies confidence in the US economy, will likely trigger a more bullish trend for these three commodities. This means we can expect a retest of their previous highs created on Wednesday and possibly a break above them.
On the contrary, lower reading from this report will induce some selloffs for these commodities. In this case, we anticipate a retest of the previous week's lows.
Forecast for the three significant commodities ahead of the Prelim UoM Consumer Sentiment report
With the dollar index currently sitting on solid support at 105.1 during the Asian session today, the three commodities such as gold, silver, and crude oil will likely remain on a ranging market temporarily.
A break above the current support level for the dollar index (USDX) will cause more sell-offs for these three significant commodities ahead of the Prelim UoM Consumer Sentiment report.
Should this report exceed its forecast of 52.5, gold will likely reclaim the $1,800 level. A lower reading from this report could push gold to the support level at $1,780.
The significant resistance for silver is seen at $21.50, while its support level is at $19.83.
The next resistance for WTI is $97.79, while its weekly support is $87.52.
Traders are advised to guard against false breakouts by using proper risk management practice while taking positions in the market today.