Gold market analysis: U.S. CPI hits a new high in more than 40 years, gold fluctuates strongly and closes higher

Last Friday, the May consumer price index released by the United States once again refreshed a new high in more than 40 years, stimulating the US dollar and US bond yields to climb. Subsequently, it recovered all the lost ground after the release of the CPI data in the violent fluctuation, and refreshed the daily high to US$1875.93, and finally closed at US$1871.51, an increase of 1.27%.



Data released by the U.S. Labor Department on Friday showed that the U.S. consumer price index rose 8.6% in May from a year earlier. The widely watched inflation gauge rose 1% from the previous month, beating market expectations. Accommodation, food and gasoline are the biggest contributors. The core CPI, which strips out the volatile food and energy components, rose 0.6% from the previous month and 6% from a year earlier, also above expectations. Traders increased bets on a rate hike by the Federal Reserve after higher-than-expected inflation data. Swap contracts show market expectations for a 50 basis point rate hike at each of the Fed's June, July and September policy meetings, with some possibility of a 75 basis point hike in September. Short-term U.S. Treasury yields surged to their highest levels since November 2018, triggering a collapse in the yield curve. The two-year Treasury yield rose as much as 12 basis points to 2.93%, the highest level since 2018. The 10-year Treasury yield rose 4 basis points to 3.08%. The spread between 2-year and 10-year Treasury yields narrowed to just 11.2 basis points. This was the main driver of gold's sharp decline in the early days of the data. However, the market soon turned its attention to economic risks. Some analysts believe that the Fed's credibility on inflation is declining, and the possibility that they will have to let the U.S. economy fall into recession is increasing. The U.S. Treasury yield curve could invert in just a few days. Some analysts also noted that with the Fed's hawkish stance already peaking, it could cause the dollar to lose momentum, easing major headwinds for gold. The movements of the foreign exchange market over the past few days were mainly influenced by the strengthening of the US dollar ahead of next week's Fed meeting, after which there may be a 'buy rumors and sell facts' style adjustment.

In terms of technical graphics, the four-hour line chart of the gold price shows that the bulls are relatively resilient. The big Yang line has rebounded strongly from around 1830. The short-term moving average is directly brought up vertically. It directly crossed the resistance level of 1861, and the support near 1820 below is quite solid. At present, the macd energy column is gradually moving away from the zero axis, and at the same time above the zero axis, which also shows that the bulls still seem to be in the volatile area. The desire to find low and enter long. However, considering that the Federal Reserve meeting on interest rates is about to take place this week, I am afraid that gold will face the risk of short sniping at high levels. If no further breakthrough can be made above gold, it is expected that in the next trading days, it will still be unable to get rid of the range-bound trading trend, and the main range is still between 1880-1828.

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Bank of China Guangdong Branch Wang Gang Source: Bank of China official website