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Gold Prices Decline as Market Awaits US CPI Data

Lead: Gold prices have decreased for six consecutive days as traders monitor the upcoming Consumer Price Index (CPI) data, following insights from the Federal Reserve's meeting minutes indicating a preference for a 50-basis-point cut in interest rates.

Main Body:

Gold prices continue their downward trend, dropping by over 0.37%, trading closely around $2,610 per ounce. This decline marks a sixth consecutive day of losses, largely attributed to the Federal Reserve's recent meeting minutes that revealed a significant majority favoring a 50-basis-point rate cut. While some officials expressed a preference for a smaller, 25-basis-point reduction, all participants recognized the necessity of reducing interest rates.

The latest updates indicate that the CME FedWatch Tool reflects a reduced likelihood of a 25-basis-point cut, now estimated at only 75.9%, down from 85.2% the previous day, as market sentiments shift towards a possible pause in rate adjustments. In conjunction with these developments, the US 10-year treasury yield has increased to 4.062%, lending strength to the US dollar, which has risen by 0.42% according to the US Dollar Index, reaching its highest level since mid-August 2024.

Ahead of the anticipated CPI data to be released on Thursday, market participants are weighing the potential outcomes on inflation and Federal Reserve policy. Analysts predict a decrease in the annual CPI from 2.5% to 2.3%, with month-over-month estimates suggesting a slip from 0.2% to 0.1%. The core CPI is expected to remain unchanged compared to August figures at 3.2% year over year.

The economic outlook suggests that if inflation rates exceed expectations, it could impede the Fed‘s easing cycle and lead to changes in monetary policy. Additionally, the week’s economic schedule includes US job data and remarks from several Federal Reserve officials. Vice-Chair Philip Jefferson mentioned a cautious, data-driven approach of "meeting by meeting," while Boston Fed President Susan Collins expressed expectations for further rate reductions based on incoming data.

Despite golds persistent decline, technical analysis indicates that if prices drop below $2,600, sellers may target psychological support at $2,550, leading to a potential test of the 50-day simple moving average at around $2,537, with $2,500 being the next significant mark. Conversely, if gold prices rebound, reclaiming the $2,650 level could pave the way for a challenge against the year-to-date high of $2,685.

In international markets, the Peoples Bank of China (PBOC) has not made any bullion purchases for five consecutive months, keeping its gold reserves unchanged at 72.8 million troy ounces as of the end of last month.

Conclusion:

As traders focus on the forthcoming CPI data, gold remains in a precarious position, heavily influenced by Federal Reserve discussions and shifts in interest rate expectations. The forthcoming inflation figures will be critical in determining market direction, not just for gold but for broader economic policy and investor sentiment. Upcoming indicators, including US jobs data and further Federal Reserve commentary, will greatly influence gold's trajectory amidst an evolving economic landscape.

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