On Wednesday (June 12), spot gold rose as much as 1% due to the surprisingly weak US consumer inflation report. However, the gold rally narrowed after the Federal Reserve said it was only expected to cut interest rates once this year due to the high level of inflation, with spot gold rising only 0.3% to close at $2,322.55 per ounce at the end of the day.
On Wednesday, the US released its May CPI monthly rate, which recorded 0%, while the core CPI monthly rate recorded 0.2%, both lower than economists' expectations of 0.3%. The core CPI fell to 3.4% year-on-year, lower than the expected 3.5%. Since the release of steady data in February and March, the CPI has been in a downward trend. As major retail product prices have dropped significantly, price pressures have continued to ease. This has enhanced expectations that the Federal Reserve will cut interest rates twice this year, by 25 basis points each time, with the first possible in September. The US May CPI data indicates that inflation in the US is slowing, which led to a surge in gold prices to as much as $30 to $2,341.51 per ounce. However, the Federal Reserve's "dot plot" showed that it will only cut interest rates once this year, and on Wednesday announced that it will maintain interest rates at their current level, pushing back the possible start time for interest rate cuts until December. Decision makers expect to cut interest rates only once this year by 25 basis points, as they believe more restrictions are needed to control inflation. Federal Reserve Chairman Powell said after the meeting that the interest rate forecast is "quite conservative" and that future data may not confirm this forecast, and may be revised. However, his attitude towards the possibility of a rate cut in September was not as direct as some investors had expected. Many people in the market originally expected Powell to start preheating for a rate cut in September, but he did not give any new hints about relaxing policy in the end. The Federal Reserve decision-makers have always maintained a vague or even hawkish attitude towards interest rate cuts, which disappointed gold investors. The joy brought about by the declining inflation rate was greatly discounted. Before September, gold investors still need to patiently wait for more US inflation data to reveal the timing of interest rate cuts. It is not easy for gold to regain its momentum before then.
Source: E-huitong
Technically, on the daily chart, the gold price rebounded continuously this week, but it is still unable to break through the resistance of the midline of the Bollinger Band channel. The gold price continues to operate under its moving average resistance, and the Bollinger Band also extends downward. Since hitting a historical peak on May 20, the gold price has experienced a continuous retreat, with its high and low points moving downward, showing that the adjustment and retreat brought about by profit-taking at high levels is still continuing. Recently, the upward focus is on the resistance levels of $2,330 and $2,343, while the downward focus is on the support levels of $2,312 and $2,300. Overall, gold can only rise to a higher level if it crosses back above $2,385. Once it falls below the recent low point support of $2,286, gold will continue its downward trend.
Wang Gang, Bank of China Guangdong Branch
For personal views only, not representative of the views of the organization.