Lower In Asia; Fed Hawkishness Eyed

Gold deals ~$5/oz weaker at typing to print $1,730/oz, off worst levels. The precious metal operates comfortably within Wednesday’s range, with the day’s move lower facilitated by an uptick in the USD (DXY) and nominal U.S. Tsy yields.

• To recap, gold closed ~$10/oz higher on Wednesday, having whipped between session highs and eleven-month lows ($1,707.5/oz) after the U.S. CPI print. A surge in Fed rate hike expectations following the data release was countered by rising worry re: recession risks, with the inversion on U.S. 2-Year/10-Year yields noted to have hit its largest in over 20 years.
• July FOMC dated OIS now price in ~92bp of tightening for that meeting, pointing to a >60% chance of a 100bp rate hike then (compared to ~75bp priced in pre-U.S. CPI). Fedspeak since the CPI print has seen no explicit ruling out of a 100bp hike for July, with the Fed’s Mester (voter) pointing to economic data due between now and the upcoming FOMC (Jul 26-27) for a decision, while the Fed’s Daly (‘24 voter) stated that a 100bp hike was “possible”.
• From a technical perspective, conditions remain bearish for gold, with focus on support at $1,706.8/oz (1.618 proj of the Mar 8-29-Apr18 price swing). Meanwhile, initial resistance is seen at $1752.3/oz (High Jul 8 / Low May 16, recent breakout level).