Gold prices continue to slide amid strong Dollar and diminishing recession worries
Gold prices declined for the second consecutive week as both the dollar index and US benchmark treasury yields rose. Concerns about the US banking sector's health and weak Chinese economic data led to a haven shift towards the dollar. Moody's Investors Service downgraded several American lenders, signalling potential concerns for a handful of larger firms.
China's disappointing exports and imports added to worries about the world's second-largest economy, further boosting the dollar. Additionally, 10-year treasury yields increased due to heightened bond issuance by the government, hampering any potential upward movement in gold prices. On another note, China continued the trend of increasing gold reserves, adding around 23 tons in July.
Central bank purchases have provided substantial support for gold demand, albeit at a slower pace compared to record purchases seen in 2022. Undoubtedly, the week's key economic event was the US Consumer Price Index (CPI) release, following a mixed Labor report the prior week. The data, indicating a slight reduction in US inflation, offered some relief and reinforced the idea that the Fed might consider a pause in September.
The figures were largely as expected, with headline inflation ticking up slightly to 3.2%, while core CPI eased to 4.7% in July. This marked the end of 12 consecutive months of declines in headline CPI since its peak of 9.1% in June 2022. The moderation in core CPI signified the smallest month-to-month gains over two years.
The super core CPI, excluding housing and energy services, also showed moderation at 0.2%. The primary contributor was housing costs, with owners' equivalent rent rising 0.5% month-to-month and 7.7% year-over-year. It's expected that this rise will
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