Gold Price Gears Up for Upside Momentum as Yield Rally Stalls

Gold price is showing renewed strength this week, capitalizing on the pause in the rally of US Treasury yields. This shift in momentum comes as hopes for additional interest-rate hikes from the Federal Reserve (Fed) dwindle. The notable decline in the US headline Consumer Price Index (CPI) from its peak of 9.1% to a current level of 3.2% is a result of an aggressive rate-tightening cycle that has taken place.

The gold price (XAU/USD) surge is influenced by the subsiding upward trajectory of US Treasury yields. This is a pivotal factor as the market’s optimism about the likelihood of further interest-rate hikes by the Federal Reserve diminishes. It’s important to note that even though the US headline Consumer Price Index (CPI) has retraced to 3.2% from its peak of 9.1%, the Federal Reserve will likely need to sustain elevated interest rates for a prolonged period. This is primarily due to the lingering presence of excess inflation that surpasses the targeted rate of 2%. This obstinate level of inflation suggests that the Fed’s efforts to stabilize the economy must be maintained.

In the forthcoming Jackson Hole Symposium, all eyes will be on Fed Chair Jerome Powell’s commentary. It’s anticipated that Powell will expound on the benefits of maintaining higher interest rates for an extended duration. Moreover, he is expected to avoid endorsing further policy tightening unless compelling economic data emerges. Prior to this significant event, investors will closely monitor the release of preliminary S&P Global PMI data, scheduled for 13:45 GMT. These data points will play a crucial role in shaping the market’s expectations and sentiment in the lead-up to Powell’s remarks at the symposium.