Gold price recovers on lower-than-expected US Inflation, US PPI eyed

• Gold price looks supported but needs to pass through more filters for a confident reversal.
• US inflation grew slower than forecasted in July as lower second-hand automobile prices offset rising rentals.
• US President Biden restricts some new investment in China in sensitive technologies.

Gold price (XAU/USD) is on a temporary cushion after an intense sell-off as investors hope that the modest pickup in the United States Consumer Price Index (CPI) for July is insufficient to force the Federal Reserve (Fed) to raise interest rates further in September. The precious metal attempts a recovery, but an upside isn’t warranted as investors are worried that inflation remains sticky amid rising rental prices.

US inflation rose at a steady pace of 0.2%, as expected by investors and aligned with the Fed’s required inflation rate of 2%. The recovery move in the Gold price is supported by a restricted upside in the US Dollar as chances of a rate cut in 2024 increase. San Francisco Fed President Mary Daly joined policymakers Patrick Harker and John Williams to open the door for rate cut discussions in 2024 depending on the evolution of the inflation economy.

Daily Digest Market Movers: Gold price awaits PPI data

• Gold price gauges support near $1,912.00 after a sheer sell-off. Still, the downside seems favored as United States CPI data for July showed inflation remains sticky.
• The US Consumer Price Index rose at a slower-than-forecasted pace in July. Higher rentals and a modest recovery in gasoline prices were broadly offset by the lower cost of second-hand automobiles.
• The monthly headline and core inflation grew by 0.2%, as expected by analysts.
• Core annual CPI softened to 4.7% from estimates and the prior release of 4.8%, while headline inflation accelerated modestly to 3.2% against the former release of 3.0% but remained marginally below the consensus of 3.3%.
• The 0.2% monthly increase is consistent with the Federal Reserve’s desired inflation rate of 2%.
• A modest rise in US inflation supports the Fed to keep interest rates unchanged in September’s monetary policy.
• As per the CME Group Fedwatch tool, traders see less than a 10% chance that the US will raise interest rates next month.
• The scenario of limited inflation and a historically low Unemployment Rate suggests that the US economy will manage to avoid a recession.
• On Thursday, San Francisco Fed Bank President Mary Daly joined Philadelphia Fed Bank President Patrick Harker and New York Fed President John Williams, saying that discussions about rate cuts would take place next year but will largely depend on the economy and inflation.
• The US Dollar Index (DXY) turns sideways around 102.60 after a sharp rally and awaits the July Producer Price Index (PPI) data for further direction. The PPI headline figure could show a rebound due to the recovery in gasoline prices.
• On Thursday, the US Department of Labor reported that individuals applying for jobless claims for the first time rose to 248K for the week ending August 4, higher than the 230K expected and the prior week's figure of 227K.
• The market mood remains cautious as US President Joe Biden announced restrictions on some new investments in China in sensitive technologies. Investors are worried that Beijing could retaliate.
• The long-awaited order authorizes the U.S. Treasury Secretary to prohibit or restrict U.S. investments in Chinese entities in three sectors: semiconductors and microelectronics, quantum information technologies, and certain artificial intelligence systems, Reuters reports.
• Commercial banks borrowing from the Fed’s emergency lending programs rose slightly for the week through August 9. Total lending from the two Fed backstop programs rose to $108.78 billion from $107.58B the prior week.

Technical Analysis: Gold price finds support near $1,910

Gold price rebounds after momentum oscillators on a lower timeframe reported that the bearish impulse weakened due to a decline in selling pressure. Still, for a confident reversal, the yellow metal has to pass through plenty of filters. Gold price is on tenterhooks as it has corrected to near the 200-day Exponential Moving Average (EMA) around $1,907.68. Failure to sustain above this level would likely push the precious metal into bearish territory.