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On May 7th, oil prices plummeted on Thursday amid news of a potential peace agreement and the possible gradual reopening of the Strait of Hormuz. Both major benchmark crude futures had already plunged more than 7% on Wednesday, hitting two-week lows as market optimism fueled hopes for a possible end to the Middle East conflict. Priyanka Sachdwa, senior market analyst at Phillip Nova, stated that from a broader perspective, the oil market has been caught between diplomatic maneuvering and supply disruptions for over two months, with investor sentiment almost daily swayed by headlines. If a formal agreement is ultimately reached, oil prices could experience a freefall as the geopolitical premium quickly dissipates from the market. However, any new signs of attacks on oil infrastructure or escalation in the Middle East could easily trigger another surge in crude oil prices. Hiroyuki Kikukawa, chief strategist at Nippon Securities Investment, said that while peace negotiations may continue at least until next week, the outlook afterward remains uncertain.May 7th - Hopes for a US-Iran peace agreement persisted, causing oil prices to fall and the US dollar to weaken. An analyst at ANZ Bank Research stated, "The situation remains highly volatile, and intraday volatility is likely to remain high until more substantial progress is seen." Lloyd Chan, senior foreign exchange analyst at MUFG, said, "All indications continue to suggest that the parties have limited willingness to further escalate the situation in the Middle East." He added that with the US midterm elections approaching and gasoline prices soaring, the US government appears motivated to resolve the conflict.On May 7, the Dutch Ministry of Health announced that a Dutch woman exhibiting suspected symptoms of Hantavirus infection had been admitted to a hospital in Amsterdam for treatment. The woman, reportedly a flight attendant for KLM Royal Dutch Airlines, had reportedly been in contact with a woman who died in Johannesburg, South Africa, from Hantavirus infection.Chinas foreign exchange reserves in April were $3,410.547 billion, below the expected $3,360 billion and the previous months $3,342.12 billion.The Dutch Ministry of Health: A Dutch woman who may have been infected with Hantavirus has been admitted to a hospital in Amsterdam.

Forecast for Gold Price: XAU/USD licks US inflation-related wounds near $1,700

Alina Haynes

Sep 14, 2022 11:39

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Gold price (XAU/USD) is under pressure near $1,700 as bears take a pause following the largest daily decline in two weeks due to US inflation. However, it should be noted that a lack of important data/events appeared to limit bullion's quick movements throughout Wednesday's Asian session.

 

Tuesday's US inflation statistics rekindled fears about the Federal Reserve's fast rate hike and exacerbated recession concerns. Also acting as factors for a decline in the XAU/USD are geopolitical concerns over China and Russia.

 

In August, the US Consumer Price Index (CPI) surpassed market expectations by increasing 8.3% year-over-year (YOY), compared to 8.8% previously. However, the monthly data increased to 0.1%, exceeding the -0.1% anticipated and 0.0% previous estimates. The core CPI, which excludes food and energy, likewise exceeded the 6.1% consensus and 5.9% prior to printing at 6.3% for the month in question.

 

Following the release of US inflation statistics, wagers on the Fed's next move became further aggressive, with a 75 basis point (bps) raise next week appearing nearly probable. There is a 25% possibility that the US Federal Reserve (Fed) will announce a complete 1% hike in the benchmark Fed rate at its meeting on September 21.

 

It should be mentioned that the yield inversion expanded after US inflation data and fueled recession concerns, which in turn weighed on the XAU/USD values due to the pair's reputation as a risk-barometer. However, following the release of the data, rates on 10-year US Treasury notes rose to 3.412% and those on 2-year bonds rose to 3.76%, from roughly 3.411% and 3.745%, respectively. In addition, the US stock market experienced its largest daily decline in over two years following the announcement of the US CPI, which thrilled metal bearish.

 

In addition to the rush toward deeper ties with China, US Vice President Joe Biden's efforts to raise China's troubles contribute to Sino-American tensions. In addition, worries that Russia will retaliate harshly after retreating from certain regions of Ukraine weighed on market mood and the price of gold.

 

A light schedule ahead of the US Producer Price Index (PPI) may keep XAU/USD on the precarious floor, but bears are likely to maintain control until Thursday's US Retail Sales for the month of August and Friday's preliminary reading of the Michigan Consumer Sentiment Index for September.

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