Gold saw a bullish surge yesterday following the release of Consumer Price Index (CPI) data, which fell closer to expectations. Key price levels for the day were identified at 2400 and 2375. Today, attention shifts to upcoming unemployment claims data.
Markets responded with mild relief to the latest US inflation and consumer spending figures, which, while not altering the Federal Open Market Committee's (FOMC) stance, prompted a cautious optimism. This sentiment led to a slight weakening of the dollar and boosted US equities, reflecting a nuanced market reaction that remains sensitive to inflationary trends.
Core CPI came in at 0.29% month-on-month seasonally adjusted, closely aligning with consensus estimates. Despite this, core CPI still registers at 3.6% month-on-month seasonally adjusted annualized rate (SAAR), indicating persistent inflationary pressures. Initial market reactions saw a decline in the US two-year Treasury yield, a weakening of the dollar, and a rise in S&P futures, although these movements were partially retraced.
Looking ahead, Fed funds futures indicate minimal expectations for policy changes in June, with a slight increase in expectations for easing by July and September. Market sentiment suggests a growing likelihood of a 50-basis points reduction by the September meeting, reflecting ongoing concerns over inflation and its implications for monetary policy.
In summary, gold's bullish run yesterday underscores the market's response to CPI data, as investors weigh inflationary pressures against central bank policies. The nuanced reaction reflects a cautious optimism tempered by ongoing uncertainties surrounding inflation and its impact on economic outlooks.