FED is out of rate cut delays, gold price will rocket?

>> Gold prices next week: Wary of US inflation

This week, the gold price in the global market has consistently increased from $2,349/oz to $2,424/oz, then dipped somewhat to $2391/oz, before rising again and closing the week at $4,411/oz.

In the Vietnamese gold market, the price of SJC gold bars remained at VND 76.98 million per tael. The price of the SJC gold ring increased dramatically at international rates, retailing at VND 76.7 million per tael. In fact, the price of gold rings from many other companies has grown faster than the price of SJC gold bars.

Following the Consumer Price Index's lower-than-expected inflation, gold is gaining speed to $2,424/oz. Core CPI, which excludes volatile food and energy costs, increased 3.0% over the previous year. Annual inflation increased at the weakest level since April 2021.

Market confidence was temporarily dampened when today's PPI report revealed a surprise spike in wholesale inflation to 2.7% year on year, above experts' estimates of a small increase from May's 2.2%. This surprise caused severe price volatility in gold, with the August futures contract beginning at $2,421 and falling to $2,396.10. The market rapidly recovered, with gold prices reaching $2,420.70 by late afternoon, down only $1.20 from the previous day's closing.

However, PPI differs from the consumer pricing index (CPI), which tracks changes in the prices of goods and services purchased by people. So, investors are primarily concerned with CPI and PCE.

Federal Reserve officials' comments added to the optimistic attitude. Powell told Congress during his two-day hearing that economic risks are balanced. "High inflation is not the only risk we face," Powell stated in his prepared remarks. San Francisco Fed President Mary Daly indicated support for interest rate decreases, while Chicago Fed President Austan Goolsbee observed that inflation appeared to be on pace to meet the Fed's 2% target. These words suggested a probable shift from a restrictive monetary policy to a more accommodating one.

According to the CME FedWatch Tool, markets expect more than a 90% likelihood of a September rate drop.

James Hyerczyk, an analyst at FX Empire, said the unexpected drop in US CPI has bolstered market players' belief that the disinflation trend has restarted. "This development has boosted investor confidence that the Federal Reserve is getting closer to considering rate cuts," he added.

From the technical picture, Hyerczyk noted that spot gold traded inside yesterday's large range on Friday. "The chart pattern implies investor hesitancy and coming volatility. Despite the dip, gold remains near the all-time high of $2450.13. In addition to the strong upward trend, XAU/USD is nicely supported by the 50-day moving average of $2347.49," he stated.

In the long run, the continued purchase of gold by central banks; the increasing decollarization process (the BRICS has almost completely removed the US dollar from intra-block trading; the Petrodollar has expired, but Saudi Arabia and the US have not renewed it, allowing the Petroyuan to rise); and gold mining is becoming increasingly difficult, as warned by the World Gold Council (WGC), will drive the gold price even higher, reaching $3,000/oz or more.