Gold, XAU / USD, Treasury Yields, Inflation, Fed – Issues
- gold US consumer price index rises after missing analysts’ estimates
- Treasury yields fall, allowing bullions to move forward
- The market may have overreacted to inflationary mistakes
- XAU /U.S. dollar Seems to be above the major moving averages
Gold prices rose overnight following prints of weaker inflation than expected from the United States. Core consumer prices, the Fed’s recommended indicator of removing volatile food and energy prices, rose 4.0% year-on-year. According to a Bloomberg study, this was 0.2% below analysts’ expectations. In addition, the August CPI print showed a slowdown in price increases from the July 4.3% figure.
The Treasury yield pullback provided cover for the bullion to move higher. Markets appear to have eased inflationary pressures as a signal that the Federal Reserve may push back its balance sheet taper in the coming months and extend its ultra-simple monetary policy. Both promote the purchase of government bonds. Benchmark 10-year bond yields fell 4.4 basis points. Low yields help with interest-free gold prices.
Chart created in TradingView
The 10-year Treasury Inflation-Indexed Bond (TIPS) yield fell overnight after the CPI was printed. Also known as a real yield that takes inflation into account, it has a high correlation with gold prices. Similar to the nominal Treasury yield, lowering the actual yield lowers the opportunity cost of the bullion holder. However, that measurement is considered a more accurate cost-of-holding measurement.
Overall, gold bulls must be cautious given that prices are well above the Fed’s average target of 2%. Relieving upward pressure on growth certainly helps the story of the Fed’s view of temporary inflation. The market may have overreacted to bets on whether the Fed will boost the taper. As the Fed begins to taper its asset purchases, a decline in demand for bonds will almost certainly exert an upward force on yields. It does not signal the price of gold.
Gold Technical Analysis:
XAU / USD exceeded the 20-day simple moving average (SMA) and the 26-day exponential moving average (EMA) on overnight trips. The 78.6% Fibonacci retracement level (1801.57) from the July / August move also gave way.This follows a violation from a previous resistance level from a downward channel It seems to be functioning as a support now in late August. If each of the two moving averages is held as a support, the price can somehow be higher. The 1834.14 level is the main potential resistance level if the Bulls move forward.
XAU / USD Daily Chart
Chart created in TradingView
— Written by Thomas Westwater, an analyst at DailyFX.com.
contact Thomas, Use the comments section below, @FxWestwaterOn twitter
The rise in XAU / USD may not persist against the possibility of CPI overreaction
Source link The rise in XAU / USD may not persist against the possibility of CPI overreaction