The US bond yields/Dollar Index
The US bond yields and the US Dollar Index dropped to multi-week lows following subdued US CPI inflation data for June. The ten-year US yields fell by 0.60% on Friday and around 2% for the week, while the two-year yields, more responsive to monetary policy, saw a decline of nearly 3% for the week. The US Dollar Index also experienced a decrease of about 0.80% for the week.
Data round-up
US CPI data for June fell below expectations across the board, with rents and other components showing moderation. The US PPI data, released on the same day, surpassed forecasts on both monthly and yearly bases. University of Michigan consumer confidence missed the forecast, but inflation expectations were lower than anticipated.
Powell’s testimony
In his recent testimony to Congress, US Federal Reserve Chair Powell expressed a more positive outlook on potential rate cuts, indicating the Fed may not wait for reaching the 2% inflation target to implement rate cuts. He also noted that the economy and job market were showing signs of cooling, suggesting a more accommodative stance.
Fed fund rate cut probability
The probability of a rate cut in September now stands above 90%, with market participants anticipating two or more rate cuts this year.
Data and events next week
Key US economic data expected next week include retail sales, industrial production, housing starts, and the Philadelphia Fed manufacturing index. Meanwhile, China’s third plenum, industrial production, retail sales, and Q2 GDP figures will be closely monitored. Additionally, Fed Chair Powell’s speech on Monday will be a focal point for traders.
Outlook
The combination of Powell’s more dovish stance, declining CPI inflation data, and continued gold buying by central banks are providing strong support for gold prices. However, China’s pause in gold purchases for the second consecutive month could present a slight negative impact. The weakening US economy, as indicated by the unexpected drop in CPI, along with declining US Dollar Index and bond yields, reflects growing rate cut expectations. Gold is expected to trend positively, with a target of $2500 in the near future. Support levels are at $2390, $2364, and $2347, while resistance levels are at $2435 and $2450. A dip buying strategy is recommended.
Overall, the current economic indicators suggest a favorable environment for gold prices, with potential for further gains in the near term.
The US bond yields/Dollar Index
The US bond yields and the US Dollar Index dropped to multi-week lows following subdued US CPI inflation data for June. The ten-year US yields fell by 0.60% on Friday and around 2% for the week, while the two-year yields, more responsive to monetary policy, saw a decline of nearly 3% for the week. The US Dollar Index also experienced a decrease of about 0.80% for the week.
Data round-up
US CPI data for June fell below expectations across the board, with rents and other components showing moderation. The US PPI data, released on the same day, surpassed forecasts on both monthly and yearly bases. University of Michigan consumer confidence missed the forecast, but inflation expectations were lower than anticipated.
Powell’s testimony
In his recent testimony to Congress, US Federal Reserve Chair Powell expressed a more positive outlook on potential rate cuts, indicating the Fed may not wait for reaching the 2% inflation target to implement rate cuts. He also noted that the economy and job market were showing signs of cooling, suggesting a more accommodative stance.
Fed fund rate cut probability
The probability of a rate cut in September now stands above 90%, with market participants anticipating two or more rate cuts this year.
Data and events next week
Key US economic data expected next week include retail sales, industrial production, housing starts, and the Philadelphia Fed manufacturing index. Meanwhile, China’s third plenum, industrial production, retail sales, and Q2 GDP figures will be closely monitored. Additionally, Fed Chair Powell’s speech on Monday will be a focal point for traders.
Outlook
The combination of Powell’s more dovish stance, declining CPI inflation data, and continued gold buying by central banks are providing strong support for gold prices. However, China’s pause in gold purchases for the second consecutive month could present a slight negative impact. The weakening US economy, as indicated by the unexpected drop in CPI, along with declining US Dollar Index and bond yields, reflects growing rate cut expectations. Gold is expected to trend positively, with a target of $2500 in the near future. Support levels are at $2390, $2364, and $2347, while resistance levels are at $2435 and $2450. A dip buying strategy is recommended.
Overall, the current economic indicators suggest a favorable environment for gold prices, with potential for further gains in the near term.
