The U.S.

The release of the data supported gold prices to rise to daily highs, but gold prices gave up gains and fell below the $1,980 per ounce mark, dragged down by a rebound in U.S. Treasury yields. While the U.S. dollar index remains weak, gold has been unable to recover from its recent losses.

Gold prices attempted to rebound on Tuesday and hit highs around $1,996 an ounce, with sellers taking control following the release of U.S. CPI. The rise in monthly inflation data means the Fed is unlikely to commit to a rate cut at its meeting tomorrow. This caused a temporary rise in U.S. Treasury yields and pushed gold prices back to key support areas.

Dailyfx analyst Zain Vawda predicts, “As geopolitical tensions remain high, gold is likely to continue to be supported and attract buyers on sharp declines. The allure of the precious metal remains high, and since an interest rate cut sometime in 2024 is not possible Avoided, gold prices are likely to remain above the $1,800/oz mark for the foreseeable future.”

The Fed is widely expected to keep its current benchmark interest rate unchanged at 5.25%-5.5% and focus on next year’s interest rate forecast and Fed Chairman Powell’s press conference. Investors will be looking for dovish hints in Powell’s comments to revive hopes of a rate cut in early 2024, which would give gold prices a new boost.

Win Thin, global head of currency strategy at Brown Brothers Harriman, said financial assets in developing economies are likely to experience conflicting drivers before the Fed starts cutting interest rates. The Fed is widely expected to leave borrowing costs unchanged this week.

He said: “The Fed’s dovish turn is positive for emerging markets and other risk assets. However, I do not think that easing policy will occur as quickly as the market expects and needs to be tested by reality.”

After the last Fed decision, Powell reminded investors that inflation progress will be “phased and volatile.” Tuesday’s consumer price index was largely in line with expectations and rose slightly, highlighting the need to return prices to the 2% target, especially The Fed is putting its focus on the tough last-mile nature of the service-sector inflation battle.

Principal Asset Management analyst Seema Shah said: “The latest consumer price index report is a bit disappointing. It is not enough to re-establish or confirm market expectations for policy easing, especially when the labor market is still very solid. Powell should push back on recent market sentiment.”

After some short-term volatility following the report, the 2-year Treasury yield held steady above 4.7%. Long-term U.S. Treasuries edged higher on strong demand at the $3 billion 30-year Treasury auction. The S&P 500 edged up to its highest level since January 2022. The panic index “VIX” reached its lowest point in nearly four years.

Evercore Vice Chairman Krishna Guha believes that the consumer price index (CPI) data will be consistent with policymakers’ sense that the deflationary process will continue to progress gradually, but there may be noise along the way.

Oscar Munoz and Gennadiy Goldberg, strategists at TD Securities, said, “Powell must proceed with caution and acknowledge the progress made in normalizing the economy while resisting the idea of ​​cutting interest rates early. We expect that he will be inclined to oppose possible dovish guidance from the committee and will make a decision at the meeting The post-press conference was cautiously hawkish.”

Strategists at TD Securities pointed out that unless there is a significant deterioration in the economy and labor market, the Fed will not ease policy unless they are sure that inflation is moving clearly and sustainably toward the 2% target. “Today’s report is unlikely to provide that certainty yet.”