Last Friday night, the US August core CPI month-on-month reading exceeded expectations, pushing up market expectations for a Fed rate hike in September. Affected by this, the US Dollar Index spiked higher then pulled back in the short term. Spot gold dipped to a low of $4291.83 per ounce, then rebounded to a high of $4402.05 per ounce before fluctuating down again. It finally closed at $4346.36 per ounce, up 0.69%; spot silver closed at $64.314 per ounce, gaining 1.27%.
In Monday's ASIan session, spot gold opened at $4334.95 per ounce. After opening lower, gold fluctuated up and down, hitting a high of $4354.92 per ounce and a low of $4326.37 per ounce. At press time, gold was consolidating near the $4332 level.
Review of European and US market action last Friday night: The US Dollar Index briefly surged to 99.35 then retreated quickly to a low of 98.97, finally closing at 99.09, up 0.01%. The 2-year US Treasury yield rose 5.7 bASIs points to close at 4.644%; the 10-year US Treasury yield climbed 0.7 bASIs points to 4.975%; the 30-year US Treasury yield fell 1.4 bASIs points to finish at 5.354%.
WTI and Brent crude retreated from highs. WTI crude closed at $99.88 per barrel, down 3.91%; Brent crude settled at $104.35 per barrel, a drop of 4.24%; US natural gas CFD price closed at $2.975 per MMBtu, down 0.402%.
The three major US stock indices all closed higher. At the close, the Dow Jones Industrial Average rose 509.10 points, or 0.98%, to 52573.20; the S&P 500 Index gained 65.24 points, or 0.86%, to 7656.94; the Nasdaq Composite Index advanced 251.31 points, or 0.96%, to 26333.04.
Major European stock markets all posted gains. At closing bell, Germany's DAX 30 rose 0.82% to 25568.56; UK FTSE 100 edged up 0.39% to 10650.44; France CAC 40 rose 0.78% to 8179.77; Spain IBEX 35 climbed 0.91% to 19838.5; Italy FTSE MIB jumped 1.36% to 52512.03.
Last Friday night, Shanghai Gold Exchange Au(T+D) closed up 0.16% at 939.5 yuan per gram; Ag(T+D) closed 0.73% higher at 15685.0 yuan per kilogram. In Monday's early trading session, SGE Au(T+D) opened flat at 938.0 yuan per gram; Ag(T+D) edged up 0.05% to 15580.0 yuan per kilogram.
Last Friday, holdings of the world's largest gold ETF, SPDR Gold Trust, fell by 2.852 tonnes from the previous day, with total holdings standing at 1047.425 tonnes. Holdings of the world's largest silver ETF, iShares Silver Trust, remained unchanged at 15316.88 tonnes.
Today's central parity rate of RMB in FX market: USD/CNY at 6.7698, down 45 pips (RMB appreciation); EUR/CNY at 7.8149, down 218 pips; HKD/CNY at 0.86325, down 5.9 pips; GBP/CNY at 9.1185, down 25 pips; AUD/CNY at 4.8231, down 99 pips; CAD/CNY at 4.8594, down 157 pips; 100JPY/CNY at 4.3799, up 185 pips; CNY/RUB at 12.5343, up 309 pips; NZD/CNY at 3.9157, down 35 pips; CNY/MYR at 0.6023, up 1 pip; CHF/CNY at 8.2608, down 464 pips; SGD/CNY at 5.3212, down 8 pips.
Latest data released last Friday night showed US August unadjusted CPI month-on-month came in at 0.4%, the highest reading since June this year, versus the prior reading of 0.1%; CPI year-on-year stood at 3.4%, unchanged from the previous figure. Both matched market forecasts.
On core inflation, US August seasonally adjusted core CPI month-on-month printed at 0.3%, the highest since May this year, above market expectations and the prior value of 0.2%. Core CPI year-on-year dropped from 2.5% to 2.4%, falling for three consecutive months and hitting the lowest level since April 2021, consistent with market consensus.
Preliminary reading of US September 1-year inflation expectation stood at 4.6%, versus expectation of 4.2% and prior reading of 4.00%. Preliminary UniveRSIty of Michigan Consumer Sentiment Index for September was 47.8, compared with forecast of 51 and prior 51.7.
US August CPI accelerated as gasoline costs rebounded after two straight monthly declines. Markets now expect headline PCE to exceed 3% by year-end, still well above the Fed's 2% target.
US consumer confidence fell for the second consecutive month, 13% lower than one year ago. One-year inflation expectations rose to the highest level since June. With fuel prices bouncing back and trade tensions intensifying, consumers anticipate greater pressure on household budgets ahead. Five-year expected business conditions remained stable, though the reading is far below the long-term average, indicating consumers believe newly emerging risks this month may not further worsen long-term prospects.
Combined with the rise in August PPI data and the robust August non-farm payrolls report, these figures are strong enough to drive a Fed rate hike. Markets price the probability of a Fed rate hike this week at roughly 90%, and expect two rate hikes before the end of the year.
At the same time, the US economy faces rising energy prices amid supply shocks from the Middle East conflict and Russia-Ukraine war. International crude oil prices broke above $100 per barrel last week, and US retail diesel prices hit all-time highs.
US economic adviser Hassett said in an interview that both Trump and he see no reason for a rate hike, and it is important for the Fed to stay on hold before the election. Separately, when asked whether he expected the Fed to raise rates at the next meeting, Trump replied he did not know.
Last week, drone attacks launched by Iraq targeted Saudi Arabia's East-West oil pipeline, forcing Saudi authorities to shut down this critical crude artery. Security conditions in the Strait of Hormuz remain precarious; another oil tanker was attacked yesterday, triggering a severe fire onboard.
In addition, the diplomatic meeting originally scheduled for today in Oman between Iran and Gulf Arab states to discuss the situation in the Strait of Hormuz was suddenly postponed after the attack on the Saudi oil pipeline. The Saudi pipeline has a capacity of 7 million barrels per day and plays a key role in mitigating severe oil supply disruptions triggered by Middle East conflicts.
The Houthi movement stated that navigation in the Bab el-Mandeb Strait remains largely normal and issued a statement launching large-scale, high-quality military operations against Saudi Arabia. Armed forces of the Yemeni government said they have recaptured positions in western Taiz previously infiltrated by Houthi fighters. Iran's president stated Iran is not in a state of war with Saudi Arabia.
Other international news: Trump said the US and Canada will likely reach an agreement soon. Trump announced the cancellation of the 10% tariff on Irish whiskey, and voiced support for Irish unity despite opposition from the UK.
Canadian Prime Minister Carney stated Canada is seeking a "unique alliance" with the EU to reduce reliance on the United States, but has no intention of becoming an EU member state.
China will take over the BRICS chairmanship in 2027. President Xi Jinping said China stands ready to work with BRICS members to play its due role in achieving peace and tranquility in the Middle East Gulf region.
From gold's week chart, gold has posted three consecutive weekly losses. Gold fell 1.90% last week, down $84. It is capped below the 5-week and 50-week moving averages while finding support at the 10-week MA. Gold is now consolidating above the $4300 level. On weekly indicators, MACD negative momentum maintains low readings, and RSI flattens near the 48 mark.
On gold's 1-hour chart, gold is consolidating between the middle and lower bands of the BOLLinger Bands. Short-term moving averages EMA5 and EMA10 form a bearish downward arrangement. MACD negative momentum stays at low levels, and RSI hovers near the 44 level. Intraday trading suggestion: watch for consolidation within the $4320-$4365 range. A break above this range targets $4375-$4385 or near $4395 to the upside; downside targets sit at $4310-$4300 or around $4290.
Key economic data and events to watch today:
20:30 Canada August CPI Month-on-Month
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