Gold prices soared during Thursday’s North American session following the release of the Consumer Price Index (CPI) in the United States, which signaled a potential easing of Federal Reserve borrowing costs. As a result, US Treasury yields fell sharply, benefiting the precious metal. XAU/USD climbed to $2,414, reflecting a rise of over 1.80% after bouncing back from daily lows of $2,371.
Market sentiment turned negative, evidenced by significant declines in the S&P 500 and Nasdaq 100, while the Dow Jones Industrial Average saw a modest advance. The yield on the 10-year Treasury note dropped 10 basis points to 4.187%.
Data from the US Bureau of Labor Statistics (BLS) indicated a decrease in consumer prices for June. The core CPI, which excludes volatile food and energy prices, also showed a decline, renewing optimism about potential Fed rate cuts in 2024.
The CME FedWatch Tool now indicates an 85% probability of a quarter-point rate cut in September, an increase from 70% just a day prior. Furthermore, the December 2024 fed funds rate futures suggest a policy easing of 49 basis points by year-end, up from 39 basis points previously.
Additional labor market data revealed a robust job sector, with fewer Americans filing for unemployment benefits than anticipated, aligning with the strong employment outlook.
Overall, the latest US economic data presents a favorable “Goldilocks” scenario: declining inflation coupled with a resilient labor market and no immediate recession risks.
In tandem, the US Dollar Index (DXY), which measures the dollar against a basket of six currencies, fell over 0.40%, settling at 104.48.
Looking ahead, upcoming US economic reports will include the Producer Price Index (PPI) for June and the University of Michigan Consumer Sentiment survey, both anticipated to provide further insights into economic conditions.
