The gold (XAU) price rose by 1.85% yesterday, the largest daily increase since March 1. Overall, XAU/USD continues to rise for the third consecutive week.
The US Consumer Price Index (CPI) report released on Thursday showed that US consumer prices declined in June. The forecast for the CPI was at 3.1%, but the actual data showed 3%, which became a strong driver for XAU/USD growth.
The annual increase in consumer prices was the smallest in a year. Gold has already reached $2,400, and as we approach lower interest rates, XAU/USD may set new record highs in the near future.
Investors are now waiting for US Producer Price Index (PPI) data today at 12:30 p.m. UTC. The PPI report may push the gold price further, above 2,400.
As reported by Reuters,
"San Francisco Fed Bank President Mary Daly on Thursday said that she expects further easing in both price pressures and the labour market to warrant interest rate cuts, while Chicago Fed Bank President Austan Goolsbee said the US economy looks like it is back on track to 2% inflation".
According to the CME FedWatch Tool, the market now prices in a 93% possibility of a rate cut in September, compared to a 70% chance before the data was released.
Gold fell slightly in the Asian and early European trading sessions as some investors began to take profits after the XAU/USD growth. Today's key data is the PPI report at 12:30 p.m. UTC, which can affect the pair.
If the numbers are lower than expected, XAU/USD may rise further and reach 2,440. Otherwise, the price may return below 2,400.
The Euro Rose on Soft US CPI Report
EUR/USD gained 0.35% on Thursday, breaking above the 1.08500 resistance level and briefly reaching the key 1.09000 level, following lower-than-expected US Consumer Price Index (CPI) report data.
US inflation data released on Thursday indicated that US consumer prices fell unexpectedly, with the lowest annual increase in a year. This development brings the Federal Reserve (Fed) one step closer to considering an interest rate reduction.
The annual core inflation rate for US consumer prices, excluding volatile items such as food and energy, continued to decline towards a three-year low of 3.3% in June 2024. The data was lower than the forecast of 3.4%, declining from a 3.4% rate in May.
Monthly core consumer prices increased by 0.1% in June 2024 compared to the previous month, indicating a moderation from the 0.2% increase in May. The numbers were below market expectations of a 0.2% increase, marking the softest monthly rise in core prices since February 2021.
San Francisco Fed President Mary Daly stated on Thursday that she anticipates a further reduction in price pressures and softening of the labor market, which would justify interest rate cuts. Meanwhile, Chicago Fed Bank President Austen Goolsbee stated that the US economy appears to be returning to a path toward 2% inflation.
According to the CME FedWatch Tool, the chances of a rate cut in September increased to 92.6%, compared to a 73.3% probability before the release of the CPI data. The US dollar Index (DXY) finished Thursday's trading session with a 0.46% decline.
On Friday, EUR/USD continued to move upwards during the Asian and early European trading sessions. The US Producer Price Index (PPI) report will be released today at 12:30 p.m. UTC. A reading higher than expected would be bearish for EUR/USD, while a lower-than-expected number would be positive for the currency pair.
Bitcoin Gained After US CPI Data and Then Lost
According to Coinbase, Bitcoin's (BTC) price jumped above $59,000 on Thursday after the US Consumer Price Index (CPI) report numbers came out lower than expected. However, BTC/USD then lost gains and finished the day down by 0.1%.
US annual inflation rate slowed towards 3% in June, fueling hopes for an interest rate cut by the Federal Reserve (Fed) in September. The initial reaction in BTC was positive, as lower interest rates tend to make alternative investment assets, such as crypto, more attractive to long-term investors. However, BTC/USD failed to hold above the 59,000 mark.
"When a market continues to sell off at a specific level, it has less to do with events, narratives, or fundamentals. Instead, a large seller perceives prices to be overvalued at that level", said Markus Thielen, founder of 10x Research.
Another reason why BTC has failed to rise on the soft CPI report may be related to the fact that US technology stocks have outperformed the main cryptocurrency.
Indeed, NASDAQ rose by some 5% over the past month, while BTC price was down by 18% over the same period. Investors may have been slowly moving their holding away from crypto into US stocks.
BTC/USD continued to fall during the Asian and early European trading sessions. Two US releases, the US Producer Price Index (PPI) report at 12:30 p.m. UTC and the Michigan Consumer Sentiment data at 3:00 p.m. UTC, may increase volatility in all USD pairs but are unlikely to change the general trend.
Fundamentally, Bitcoin has been under considerable pressure, precisely due to a flood of supply from the sale of government holdings and the bankruptcy of the Mt. Gox exchange. Only a rise and a close above $59,000 will invalidate the underlying bearish technical trend.