GOLD, XAU/USD, US Dollar, JPY, Fed, Kashkari, Evans, Crude Oil – Talking Points
- The gold price struggled to make headway against a sliding US Dollar
- APAC equities took Wall Street cues to higher ground on soft US CPI
- All eyes on US PPI ahead. Will XAU/USD benefit from a fragile US Dollar?
The gold price slipped today, despite a weakening US Dollar that saw most other commodities rally. It is trading near US$ 1,785 an ounce. This is being attributed a bump up in real yields after US inflation data.
The market reaction to US CPI was to buy risk across all asset classes. Equities, commodities and growth linked currencies got a boost while bonds and currencies with defensive characteristics were sold.
An exception to the latter was the Japanese Yen, It roared higher on the notion that US yields would be heading south. Yields did initially dip on the US CPI release, but language from two Fed speakers reversed the moves.
The Treasury market appears to be acknowledging a very hawkish Fed, while equity prices appear to reflect the end of aggressive rate hikes. The 2s 10s part the yield curve remains inverted near 22-year lows.
To recap, headline US CPI printed at 8.5% year-on-year to the end of July instead of 8.7% forecast and 9.1% previously. Core US CPI was the same as the prior month at 5.9%, but lower than 6.1% anticipated.
Federal Reserve Bank of MinneapolisPresident Neel Kashkari said that the idea that a rate cut is possible next year is unrealistic with inflation where it is.
His comments were supportedby Federal Reserve Bank of Chicago PresidentCharles Evans when he said that he sees rates rising into year end and next year.
The boost to Wall Street took the Nasdaq 2.89% higher. All the major equity indices in APAC are up 1 – 2% as a result of the positive lead.
Crude oil has held its gains, despite U.S. Energy Information Administration data that showed US oil stocks rose by 5.5 million barrels last week, much more than the 73k forecast.
The WTI futures contract is near US$ 91.60 bbl while the Brent contract is a touch above US$ 97 bbl.
Elsewhere today, the Peoples Bank of China (PBOC) released a report that warns on inflation risks for the Chinese economy. They see inflation eclipsing 3% in 2022 against yesterday’s print of 2.7%, a two-year high.
After the reaction to US CPI, US PPI due out later today could provide some fireworks. San Francisco Fed President Mary Daly is also due to appear on Bloomberg television.
The full economic calendar can be viewed here.
GOLD AGAINST US 10-YEAR REAL YIELD AND USD (DXY) INDEX
— Written by Daniel McCarthy, Strategist for DailyFX.com
To contact Daniel, use the comments section below or @DanMcCathyFX on Twitter
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