Gold prices might give up $2500 as dollar rebounds
- Gold prices back off record highs
- Markets await important US inflation data
Gold prices fell in European trade on Wednesday for the first time in four sessions, about to fall below $2500 and move away from earlier record highs on profit-taking, while under pressure from the stronger dollar.
Now investors await important US inflation data this week to gauge the likely path ahead for Fed rate cuts.
Prices
Gold prices fell 0.85% today to $2503 an ounce, with a session-high at $2529.
On Tuesday, prices rose 0.3%, approaching a record high at $2531 an ounce.
The Dollar
The dollar index rose 0.4% on Wednesday and held its ground above eight-month lows at 100.51 against a basket of major rivals, in turn pressuring greenback-denominated gold futures.
The gains came after solid US housing prices and consumer sentiment data.
US Rates
According to the Fedwatch tool, the odds of a 0.5% Fed rate cut in September stood at 38%, and at 62% for a 0.25% rate cut.
Markets are expecting 100 basis points of US rate cuts this year.
The SPDR
Gold holdings at the SPDR Gold Trust remained flat yesterday at 856.12 tonnes, the lowest since August 16.
Sterling gives up 29-month peak on profit-taking
- BOE rate cut prospects recede
- Markets await UK data
Sterling fell in European trade on Wednesday against a basket of major rivals away from 29-month highs against the dollar on profit-taking.
The pound was massively boosted after recent bullish remarks by Bank of England Governor Andrew Bailey in Jackson Hall.
The remarks hurt the odds of UK interest rate cuts in September.
The Price
The GBP/USD pair fell 0.3% today to $1.3217, with a session-high at $1.3264.
The pair closed up 0.55% on Tuesday, marking 29-month highs at $1.3266.
Bailey
Bank of England Governor Andrew Bailey said it remains too early to announce victory over inflation in the UK, indicating a more persistent bullish stance on policies.
The remarks are contradictory to his Fed counterpart Jerome Powell, which used the Jackson Hall platform to confirm a September rate cut.
Bailey has cautioned that inflation might rise once again by the end of the year, posing risks.
UK Rates
Following Bailey’s speech, the odds of a BOE interest rate cut in September stood at just 30%, and at 50% for a September rate cut.
US Rates
According to the Fedwatch tool, the odds of a 0.5% Fed rate cut in September stood at 38%, and at 62% for a 0.25% rate cut.
Markets are expecting 100 basis points of US rate cuts this year.
Rate Gap
The current UK-US rate gap stands at 50 basis points in favor of the US, and will likely shrink to 25 basis points at least in September, underpinning the pound’s standing against the dollar.
Aussie rallies to seven-month high after inflation data
- RBA faces deep inflation risks
- Odds of Australian rate cuts this year decline
The Australian dollar rallied in Asian trade on Wednesday to seven-month highs against its US counterpart after earlier inflation data showed how persistent price pressures remain.
The data reduced the odds of a rate cut by the Reserve Bank of Australia this year, in turn boosting the currency against its international rivals.
The Price
The AUD/USD pair rose 0.3% today to 0.6813, the highest since January, with a session-low at 0.6784.
The pair rose 0.3% on Tuesday as the greenback faced increased pressures following Fed Chair Jerome Powell’s bearish speech at Jackson Hall.
Australian Inflation
Official data showed Australia’s consumer prices rose 3.5% in July, above estimates of 3.4%.
The stubbornly high consumer prices are a disappointment for policymakers, and nudged markets to give up hopes of RBA rate cuts this year.
The RBA
The Reserve Bank of Australia’s August meeting minutes showed that policymakers went as far as to consider hiking interest rates to control inflation.
Australian Rates
Most analysts still expect the next policy step by the RBA to be policy easing and rate hikes, but such a process will likely not start until 2025.
Dow Jones backs off historic highs
US stock indices were mixed on Tuesday amid selling pressures, with traders collecting profits after Dow Jones marked record highs yesterday.
Federal Reserve Chair Jerome Powell sent out his strongest signal yet of an approaching interest rate cut during his speech at Jackson Hall.
He pointed to the progress achieved in controlling inflation, with the Fed now preparing to shift its focus to the second half of its mandate, to ensure full employment.
Now investors await results by Nvidia later this week to gauge the strength and durability of AI momentum.
On trading, Dow Jones fell 0.1%, or 50 points as of 17:15 GMT to 41,191, while S&P 500 rose 0.1%, or 5 points to 5621, as NASDAQ added 0.1%, or 15 points to 17,742.