Gold Prices Tied to US CPI Report and Iran War Escalation
The price of gold has erased its gains following the announcement of Treasury buybacks after Federal Reserve Chairman Warsh's hawkish speech at the Jackson Hole Symposium. As a result, markets have seen pullbacks across various sectors, stabilizing as the hawkish repricing takes hold.
Traders are now looking to the upcoming US Consumer Price Index (CPI) report next Friday for key direction on interest rate expectations and gold prices. Currently, there's a 58% chance of a rate hike in September, according to traders' views.
A soft CPI reading could bring this probability below 50%, potentially deterring the Fed from hiking rates at their upcoming meeting. However, if probabilities remain above 50%, the Fed might be forced to hike rates regardless, sending a dovish message and limiting gold's upside.
Gold's upside is currently constrained by Federal Reserve tightening risks and the escalation of the US-Iran war. A de-escalation in the Middle East and dovish repricing in interest rate expectations could drive gold prices higher, while a hot CPI without a de-escalation in the war could trigger another selloff.
On the technical analysis front, gold has bounced off its key swing low around $4,311, with buyers stepping in to position for a rally into $4,890. However, sellers will need the price to break below $4,311 to open up the door for a move into $3,885.