Gold Prices Plummet as Fed Rate Hike Fears Surges to 90%
The recent CPI data release and the overwhelming consensus in the market that the Fed will raise interest rates have caused gold prices to fluctuate wildly. The US unadjusted Consumer Price Index (CPI) rose 0.4% month-on-month in August, the highest since June this year, compared with 0.1% in the previous month.
This news is bullish for the US dollar and bearish for gold. The probability of a Federal Reserve rate hike this week has surged to 90%, prompting investment banks to revoke their reports and the camp advocating against rate hikes this year. This also suggests that funds are withdrawing from the precious metals sector, hindering gold's upward movement.
On the other hand, the OPEC+ production cut plan, combined with geopolitical disturbances in the Middle East and a larger-than-expected decline in US crude oil inventories, have tightened the supply-demand balance and provided fundamental support for oil prices. The US Treasury real yields have also bottomed out and rebounded, easing market risk aversion.
Technically, gold failed to break through the upper resistance level and fell back, breaking below the short-term moving average system. In contrast, crude oil has found strong support at key levels and has returned above the moving average system. The 4-hour MACD histogram is converging for crude oil, indicating gradually accumulating bullish momentum.