Gold declines as investors brace for a test of US inflation

10 Aug 2023 , 10:35 AM

Gold prices remained close to one-month lows on Thursday as traders awaited crucial U.S. inflation data that would determine how the Federal Reserve would set future interest rates.

Spot gold held steady at $1,916.19 per ounce, just a few dollars above the mark it reached on Wednesday as its lowest price since July 10. At $1,948.90, U.S. gold futures were down 0.1%.

In July, the consumer market in China experienced deflation as it battled to boost demand and as pressure built on Beijing to implement more immediate policy stimuli.

Data on the U.S. consumer price index (CPI), which is due later today, is anticipated to indicate a small increase in inflation in July.

Although rate increases increase the opportunity cost of owning non-yielding bullion, gold is nevertheless seen as an inflation hedge.

According to bond strategists surveyed by Reuters, U.S. Treasury yields will decline in the upcoming months despite obvious indications the Fed is hesitant to consider rate reduction anytime soon. The 10-year yield will not return to its cycle top.

On Wednesday, interest rates strongly reacted to a lowering of U.S. government debt, sending the average 30-year mortgage rate in the United States to a nine-month high and the second-highest rate since.

On Wednesday, President Joe Biden signed an executive order requiring government notification in other such areas and banning some new U.S. investment in China for critical technologies like computer chips. This might lead to a resurgence of hostilities between the two largest economies in the world.

The largest gold-backed exchange-traded fund in the world, SPDR Gold Trust, reported on Wednesday that its holdings had decreased to 903.38 tonnes, the lowest level since March.

The price of palladium was around $1,234.90, platinum was at $888.11, and spot silver was trading around $22.67 per ounce.

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