Gold prices fell on Tuesday, snapping a three-day winning streak, amid a surge in U.S. 10-year bond yields on the back of higher-than-expected CPI figures.
At the time of writing, gold spot XAU/USD is trading at the $1705 area, posting a % daily decline, having set a daily high of $1731 earlier in the session and a low of $1697 post data.
The U.S. Department of Labor Statistics released August’s CPI figures. The headline inflation rate climbed to 8.3% YoY versus expectations of 8.1%. The core inflation annual rate reached 6.3%, above the market consensus of 6.1%.
Just as Chair Powell commented in Jackson Hole, the Fed welcomed July’s reading, but they argued that the job wasn’t done, and with the August figures, market participants are expecting more aggressive moves from the Committee in the next meetings.
The WIRP Tool suggests that a 75 basis points rate hike is now fully priced in for the September meeting, and investors are betting on 14% odds of a bigger increase of 100 bps. As a reaction, U.S. 10-year bond yields, which could be seen as the opportunity cost of holding gold, surged more than 2.5% to the highest level since June 16 to 3.46%. The yields’ rally boosted the U.S. dollar, with the DXY index rising more than 1% to a peak of 109.69.
From a technical perspective, the XAU/USD short-term bias remains bearish, with indicators suggesting increasing downward momentum. On the daily chart, the RSI is gaining a significant negative slope, while the MACD crossed below its signal line and printed a higher red bar, indicating a growing selling interest.
On the downside, the bulls will try to defend the $1690 area and the cycle low of $1680, critical support. A loss of the latter would expose the $1665 zone, last visited in June 2020. On the other hand, resistance levels are seen at the $1710 zone, followed by the 20-day SMA, currently at $1728, and then the $1740 area.