Gold holds near three month high as markets await US inflation data
Gold's ability to hold its recent gains without giving much back suggests the market is comfortable with its current positioning ahead of today's inflation print, rather than nervously unwinding into the event. The setup favours further upside if the PCE data comes in soft and Warsh strikes a balanced or dovish tone at Jackson Hole on Friday, since that combination would reinforce expectations for lower real yields and reduce the opportunity cost of holding a non-yielding asset like gold. Renewed concern about US fiscal sustainability, a theme already stirred by the Treasury's bond buyback intervention, is flagged as a further potential driver, one that could support gold even independent of the near term rate path. Separately, easing Middle East tensions, with Iran and Oman resuming talks over the Strait of Hormuz, have pulled oil prices lower, a dynamic that could complicate the inflation outlook gold traders are pricing given lower energy costs typically ease headline price pressures.
--- Gold isn't going anywhere in either direction until it sees today's inflation print and hears what Warsh has to say on Friday.
Summary:
- Spot gold was little changed on Wednesday after climbing to its highest level since mid-May in the prior session
- Tuesday's gains followed a sharp rally last week triggered by the US Treasury's bond buyback announcement
- The Fed's preferred inflation gauge, the July PCE price index, is due today, as covered in our earlier PCE preview
- Markets are also focused on Fed Chair Kevin Warsh's speech at the Jackson Hole symposium on Friday
- Analysts say the most supportive scenario for gold would be a softer than expected inflation print paired with a dovish or balanced tone from Warsh, which would reinforce expectations for lower real yields
- Renewed concern about US fiscal sustainability, particularly around the Treasury's buyback plans, is flagged as another potential driver for gold
- Earlier this month, an unexpected decline in nonfarm payrolls alongside in-line consumer inflation had already tempered expectations for a September rate hike
- Traders are currently pricing in roughly a two in three chance that the Fed leaves rates unchanged at its next meeting, according to the CME FedWatch Tool
- Separately, Iran said it has resumed talks with Oman over managing the Strait of Hormuz, a development that sent oil prices lower
Gold held broadly steady on Wednesday, consolidating after touching its highest level since mid-May in the previous session, as investors held back from placing fresh bets ahead of a closely watched US inflation report due later today.
Tuesday's move higher extended a sharp rally that began last week following the US Treasury's announcement of an expanded bond buyback programme, a step taken to calm a bond market sell off that had pushed long dated yields to multi decade highs. That episode has kept concerns about US fiscal sustainability in the background of gold's recent strength, alongside the more immediate driver of shifting interest rate expectations.
As covered in our earlier preview, today's release is the Personal Consumption Expenditures price index for July, the Federal Reserve's preferred inflation gauge, due at 12:30pm GMT. Markets are treating the data as a key input ahead of Fed Chair Kevin Warsh's keynote address at the Jackson Hole symposium on Friday, an appearance being closely watched for signals on the central bank's next move.
Analysts say the combination that would most support further gains in gold would be a softer than expected inflation print paired with a dovish or balanced message from Warsh, since that outcome would reinforce expectations for lower real yields and reduce the opportunity cost of holding an asset that pays no yield. Separately, any renewed deterioration in confidence around US fiscal sustainability, particularly linked to the ongoing effects of the Treasury's buyback plans, was also flagged as a factor that could support gold independent of the near term rate path.
The current setup follows a run of data earlier this month that already softened expectations for near term tightening, including an unexpected decline in nonfarm payrolls alongside a consumer inflation reading that came in broadly in line with forecasts. Traders are currently pricing in roughly a two in three chance that the Fed will leave interest rates unchanged at its next meeting, according to the CME FedWatch Tool, a backdrop that has generally supported gold in recent sessions.
On the geopolitical side, Iran said it has resumed talks with Oman aimed at managing the Strait of Hormuz, a development that sent oil prices lower and offered some tentative signs of de-escalation in a conflict that has otherwise remained a source of market uncertainty. For gold, a further easing in Middle East tensions could reduce safe haven demand at the margin, even as the metal's more immediate direction remains tied to today's inflation data and Friday's central bank commentary.
This article was written by Eamonn Sheridan at investinglive.com.提供 MainLink：Investinglive RSS Breaking News Feed
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