Gold up as Hot June CPI Triggers a “Sell The News” on Dollar
2022.07.13 21:11
Budrigannews.com — Fawad Razaqzada puts it succinctly. “The market’s reaction to news is always more important than the news itself,” says the analyst for London-based StoneX as gold rose for the first time in three days on Wednesday while the dollar fell, after the United States stunned the world with another red-hot inflation print for June.
Gold futures for August delivery on New York’s Comex settled up $10.70, or 0.6%, at $1,735.50 per ounce. It was a tiny ray of hope for bulls in the yellow metal, which lost 1% over two previous sessions.
Notwithstanding Wednesday’s rebound, Comex gold was still headed for a fifth straight week of losses that had taken it down $140 or almost 7.5% since the week ended June 3. Year-to-date, Comex gold remains down about 6% for the year.
Gold rose within the mid-$1,700 channel, while the dollar retreated from two-decade highs after the Consumer Price Index surged 9.1% during the year to June.
The figure overshot the 8.8% annual growth economists had anticipated for June, after the previous 12-month expansion of 8.6% in May.
“There is a possibility we may have seen a top of the greenback and a low for gold,” Razaqzada wrote.
“The post-CPI reaction clearly suggests that investors are thinking that the big inflation readings will hurt the economy so badly that not only will the Fed stop hiking rates soon, but will go in (the) reverse in as early as Q1,” he added.
As proof, he pointed to the flagship 10-year U.S. bond yield at below 3%, and the simultaneous pricing-in of an 18-basis point rate cut by the first quarter of 2023.
Be that as it may, some forecasters, including Nomura, were calling for a record 100-basis point rate for July itself versus previous bets for just 75 bps.
Investing.com’s Fed tracker tool showed an almost 70% chance of a full percentage-point hike at the July 27 rate revision meeting of the central bank.
Few analysts also expected the dollar to remain down for long based on near-term technical readings for the Dollar Index, although many conceded that it was overbought and a technical pullback was due.
