CPI data released, market expectations for interest rate cuts lower, gold prices lower

On August 14th, COMEX gold prices experienced a significant pullback during trading, ultimately closing at $2486.0 per ounce, with a daily decline of 0.87%. At the same time, the Shanghai Futures Exchange (SHFE) gold market in China also showed a volatile downward trend in night trading, with a closing price of $563.50 per ounce, a decrease of 0.82%.

In terms of US economic data, the Consumer Price Index (CPI) increased by 2.9% year-on-year in July, which has slowed down for four consecutive months and is lower than market expectations and the previous month’s level (both at 3%). It is worth noting that the core CPI in July increased by 3.2% year-on-year, which is in line with expectations but the lowest growth rate since the beginning of 2021, further highlighting the easing of inflationary pressure. Although CPI data has strengthened market expectations for the Fed’s September interest rate cut, the strong growth in housing costs has weakened the market’s optimistic forecast for a one-time 50 basis point rate cut, leading to a reduction in the phenomenon of the “Fed rate cut premium”.

According to the Chicago Mercantile Exchange’s (CME) Federal Reserve Watch tool, the market’s current forecast for the magnitude of the Fed’s September rate cut has been adjusted, with the probability of a significant 50 basis point cut dropping from 53% before the data was released to 37%. As a result, the US dollar index strengthened, thereby suppressing the upward momentum of gold. It is expected that gold will continue to maintain a volatile trend in Thursday and Sunday trading after its weak performance in the night session.

Looking ahead to the future, the US retail sales data for July, which will be released on Thursday evening, will become the focus of market attention. This data is expected to provide more clues for the current state of the US economy and the Federal Reserve’s future interest rate cut decision-making path. Investors need to closely monitor whether the data will perform beyond expectations in order to assess its potential impact on the gold market trend.