Rising bond rates put pressure on gold
The equity and bond markets are not the only ones to be weakened by the latest report on inflation in the United States. The price of gold has also been under pressure since Tuesday in the face of the rise in bond yields caused by the greater than expected acceleration in underlying inflation in the United States last month. Core inflation rose by 6.3% while the consensus was expecting a rise of 6.1% against 5.8% in July.
Since the publication of the inflation report, the US 10-year rate has risen by 15 basis points to reach a new high level since June at 3.5%, while the 2-year rate has risen by nearly 40 basis points. basis to reach its highest level since 2017 at around 4%.
Inevitably, the prices of gold and other precious metals are bearing the brunt of the rise in bond rates. The ounce has fallen by more than 3% since the start of the week, thus falling to its lowest level since April 2020 at $1660.
The next major catalyst for gold will be the next Fed meeting next week. It could remain in equilibrium, or even rebound, if the FOMC decides to raise rates by 75 basis points, which is currently the preferred scenario for investors, or continue to fall if the FOMC decides to hit even harder on the way up. its rates by 100 basis points.
The short-term risks are more on the downside, as the Fed is more likely to do more than not enough. The FOMC could also revise their estimate of the neutral rate upwards, which would also put pressure on gold.
Gold Price Daily Chart – Key Levels