3 weeks ago
Gold hits two-month high as Fed rate hike bets weaken
Gold is a shiny metal that many people like to buy to keep their money safe.
When people think gold prices will go up, they buy more gold, and the price goes up.
Recently, gold reached its highest price in two months.
One reason is that fewer people got jobs in the US than expected in July.
That made people think the US Federal Reserve might raise interest rates later than first thought.
When interest rates seem likely to stay low, gold becomes more appealing because it doesn't pay interest.
The US dollar also got weaker, which made gold cheaper for people using other money.
Big central banks around the world bought a lot of gold in June, which helped push the price up.
People are now waiting to see new inflation numbers to know what happens next with gold prices.
Gold hit a two-month high, rising from a recent low of $3,966 to $4,400 as of August 10.
July US jobs data showed a loss of 23,000 jobs, sharply missing forecasts and lowering the odds of a September Fed rate hike.
A weaker US dollar, helped by reduced rate-hike expectations, supported non-yielding assets like gold.
Central banks bought 51 tonnes of gold in June, with the People's Bank of China adding 15 tonnes for a 20th consecutive month.
Markets now await July US CPI data on August 12, while oil stayed above $88 per barrel amid Strait of Hormuz uncertainty.
- Who
- Investors and central banks, including the People's Bank of China; analysts Shawn Young, Dr. Renisha Chainani, and Lukman Otunuga commented on the move.
- What
- Gold prices rallied to a two-month high, climbing from $3,966 to $4,400 as of August 10.
- Where
- Global markets, including India, where gold traded at Rs 1,52,230 per 10 grams, and China.
- When
- As of August 10, with key US CPI data for July due on August 12.
- Why
- Soft July US jobs data lowered expectations of a September Fed rate hike, weakening the dollar and supporting non-yielding gold, aided by continued central bank buying.
Bullish: rally has more room to run
Cautious: inflation could reverse gains
Impact of US inflation data
Bullish: rally has more room to run
Softer incoming inflation data would reinforce gold's bullish momentum; a break above the $4,390 100-day SMA could open the door to further gains.
Cautious: inflation could reverse gains
A hotter-than-expected CPI reading could revive rate-hike bets and pressure gold; the main risk is a renewed inflation shock that pushes rate expectations and the dollar and real yields up.
Outlook for US Fed rate hikes
Bullish: rally has more room to run
Weak July jobs data lowered the probability of a September hike, with markets now expecting one in October or December, which favors gold.
Cautious: inflation could reverse gains
Markets still expect a rate increase eventually, and any rate hike is unfavorable for non-yielding assets like gold, so the reprieve may be temporary.
Middle East oil supply risk
Bullish: rally has more room to run
Fewer US strikes against Iran suggest a potential deal, and oil traded lower, pointing to easing supply disruptions.
Cautious: inflation could reverse gains
Fresh demands from Trump cloud prospects for a near-term agreement, keeping markets wary of prolonged supply disruptions; oil rose for a fourth straight session above $88 per barrel.
Key facts
- Gold price (Aug 10)
- $4,400, a two-month high
- Recent low
- $3,966
- India gold price
- Rs 1,52,230 per 10 grams (up Rs 170)
- US July jobs change
- -23,000 jobs
- US unemployment rate
- 4.1%, down from 4.2%
- Central bank June purchases
- 51 tonnes (World Gold Council)
- People's Bank of China buying
- 15 tonnes in June, 20th straight month
- Next catalyst
- US July CPI data on August 12
Quotes
Shawn Young
Chief Analyst, MEXC Research
“"The main risk is a renewed inflation shock that pushes rate expectations higher again and sends the dollar and real yields up. Short of that, I think this move has further to run."”
financialexpress.com
Dr. Renisha Chainani
Chief Research Officer, Augmont
“"Wednesday’s US consumer price report and Thursday’s producer price data will likely steer rate expectations, coming after last week’s soft July jobs numbers pushed markets to pare back bets on a Fed rate raise next month. Should the incoming data keep pointing to a slowing economy without inflation picking back up, markets may trim expectations for tighter policy even further."”
financialexpress.com
Lukman Otunuga
Head of Market Research, FXTM
“"A hotter-than-expected reading could revive rate‑hike bets and pressure gold, whereas softer inflation may reinforce the bullish momentum. Gold has already gained around 9% this month, and a break above the $4,390 100-day SMA could open the door to further gains, with the 200-day SMA next in focus."”
financialexpress.com
Sources
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