Gold Falls Below US$4,000, Middle East Conflict Pressures
Gold prices weakened again on Thursday, despite two previous US inflation data coming in lower than expected. XAU/USD traded around US$3,983 per troy ounce, down 1.90% on the day.
The US Consumer Price Index (CPI) and Producer Price Index (PPI) data for June both came in below market expectations. However, gold failed to gain a strong boost because the data only delayed expectations of an imminent Fed rate hike, rather than completely eliminating the risk of a rate hike.
Pressure on gold also came from a rebound in the US dollar and Treasury yields after two consecutive days of decline. The strengthening dollar and yields made gold less attractive, as the precious metal does not provide a yield like bonds.
Fed officials continued to emphasize the importance of sustainably bringing inflation back to its 2% target. At the same time, the US labor market is considered to be stabilizing, giving the central bank room to raise interest rates later in the year if inflation struggles to fall again.
Recent economic data also suggests the US economy remains quite strong. Retail sales rose 0.2% month-on-month in June, in line with expectations, while initial jobless claims fell to 208,000, lower than the 217,000 forecast. This situation reinforces the view that interest rate pressure on gold has not completely dissipated.
In terms of market impact, gold remains biased to the downside as long as prices remain below the psychological level of US$4,000. Continued US-Iran tensions and potential disruptions to the Red Sea route have pushed WTI oil prices closer to US$80 per barrel, looming again as the risk of energy inflation. If the dollar and yields continue to strengthen, XAU/USD could remain under pressure, while other global assets could also become more volatile. (asd)
Source: Newsmaker.id
