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Gold prices fell below $2,500 an ounce on Friday as Treasury yields and the dollar rose after U.S. inflation data came in line with expectations, raising the possibility that interest rate cuts will be moderate.
Data from the Department of Commerce showed that the consumer price index, considered the Federal Reserve’s favorite inflation gauge, rose 0.2% last month, matching economists’ forecasts.
The data confirms the Federal Reserve’s intention to begin easing monetary policy at its upcoming September meeting. Most market observers expect the first rate cut to be a modest 25 basis points.
Investors will now look to the future to the U.S. nonfarm payroll report due next week, “which will confirm whether there will be a 50 or 25 basis point rate cut at the September meeting,” said Phillip Streible, chief market strategist at Blue Line Futures, according to Reuters.
Settlement of the Comex Gold (XAUUSD:CUR) contract for September delivery in the first month -1.2% to $2,493.80/oz to end the week down 0.7%, but gold is up 2.7% this month, its sixth consecutive monthly gain; gold is up 21% year-on-year and is slightly off yesterday’s settlement high of $2,525.70.
September Silver (XAGUSD:CUR) Closed -2.8% on Friday, down 3.6% for the week but only 0.1% for the month, its third straight monthly loss; silver is up 20% year-on-year.
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TD Securities strategist Daniel Ghali said he predicts short-term decline in gold value as “positioning signals are flashing red on several fronts,” with macro fund positions being particularly extreme, Bloomberg reports.
“Systematic trend followers are basically maxed out,” Ghali says. “We also think positioning in Shanghai is approaching record levels… despite the fact that physical demand in China has been quite weak and inflows from Chinese gold ETFs have been weak as well.”
A decline towards $2,430 an ounce could trigger liquidation, Ghali said.
