Surprise CPI Boosts Optimism for Rate Cuts, Gold Price Breaks $2400 Approaching Historic Highs
Gold price breaks through $2400, approaching historical highs, as the unexpected drop in the US Consumer Price Index boosts hopes of a rate cut by the Federal Reserve. Other factors include central bank buying, geopolitical tensions, and the impact of Chinese consumer purchases. Inflation slowdown and economic activity deceleration also affect the gold price. Low inflation data exacerbates the rise in precious metals, with some believing that investor interest in gold may increase
According to the Zhitong Finance and Economics APP, the price of gold has surged to above $2400 per ounce, approaching the record high set in May. Previously, the unexpected drop in the US Consumer Price Index (CPI) boosted hopes that the Federal Reserve would soon start cutting interest rates.
Data released by the US Bureau of Labor Statistics shows a 0.1% month-on-month decrease in US CPI, the first negative growth in over four years, leading to a 2.3% increase in gold prices. Another key core price index (excluding food and energy) only rose by 0.1%, further supporting the case for a rate cut in September.
Despite expectations of a policy shift due to high interest rates and persistent inflation, gold prices have soared to historic highs this year, surprising many observers. Strong buying from central banks around the world, investors' safe-haven demand amid geopolitical tensions, and Chinese consumer purchases have all boosted gold prices.
Data released on Thursday shows that after a resurgence in inflation earlier this year, it is now starting to slow down, and broader economic activity also appears to be slowing. On Wednesday, Federal Reserve Chairman Powell concluded the second day of his testimony in Washington. He mentioned during the hearing that the Fed does not need inflation to be below 2% to cut rates.
As a non-interest-bearing asset, high interest rates have always been a negative factor for gold.
Ryan Mckay, Senior Commodity Strategist at TD Securities, stated in a report: "Lower-than-expected inflation data has intensified the rally in precious metals. A key macro group that has been cautious so far is increasingly likely to regain interest in gold."