Market-moving CPI report is expected to show price pressures eased to 2.6% in August. Anything below will be great news for the Fed.
• Gold prices were hugging the flatline early Tuesday after a boring session on Monday saw prices going nowhere. But for a good reason. Traders are shifting their attention to a key economic report — the last big one before the Federal Reserve meets to decide by how much to lower interest rates. This week’s narrative in gold is going to gravitate toward US inflation data.
• The consumer price index (CPI) is slated for release on Wednesday and gold has already consolidated near $2,500 per ounce as bullion holders anticipate some good news. Inflation for August is expected to drop to 2.6% from 2.9% in July. If true, the softening price growth will strengthen investor conviction over a bigger rate cut to the tune of 50bps, instead of 25bps. Gold hit a record of $2,530 on August 20.
• Looking ahead, gold prices are likely to get a bit choppy as traders position their portfolios for the inflation release. Lower inflation has been unusually beneficial to gold, which is considered a hedge against inflation. This is largely because low inflation may lead to a bigger interest rate cut. And gold is sensitive to lower rates because they reduce the opportunity cost of holding the non-yielding precious metal.…Read more by
