World gold prices fell slightly yesterday as data showed US consumer prices rising rapidly, with expectations that the inflation index may not prompt a major change in the Fed's interest rate strategy. Department of Labor data showed that headline and core CPI in August increased 0.6% and 0.3%, respectively, from the previous month. Economists expected increases of 0.6% and 0.2%, respectively.
However, traders' expectations that the Fed will keep interest rates unchanged at its September 19-20 policy meeting only became stronger after this data. At the same time, the CME FedWatch tool prices a roughly 44% chance of another Fed rate hike before 2024. Precious metals investors are less worried about higher inflation and more focused on spending opportunity costs associated with holding non-interest bearing assets in a rising interest rate environment.
However, traders' expectations that the Fed will keep interest rates unchanged at its September 19-20 policy meeting only became stronger after this data. At the same time, the CME FedWatch tool prices a roughly 44% chance of another Fed rate hike before 2024. Precious metals investors are less worried about higher inflation and more focused on spending opportunity costs associated with holding non-interest bearing assets in a rising interest rate environment.
