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Sharply Lower As US CPI Data Reduced Easing Hopes

GOLD

Gold is steady in the Asia-Pac session, after closing 1.3% lower at $1993.15 on Tuesday following hotter than expected US CPI data.

  • Both headline and core CPI inflation figures for January surpassed expectations by 0.1 percentage points, with rounding pushing the annual figures up by 0.2 percentage points. The core measure increased by 0.4% m/m, maintaining the annual increase of 3.9% y/y, unchanged from the prior month.
  • US Treasury yields finished 9-21bps higher, with the 2/10 curve flatter. The January CPI report strongly supported the FOMC's patient stance and dealt a significant blow to dovish expectations for near-term policy easing.
  • Projected Fed rate cut pricing continued to ebb: March’s chance of a 25bp rate cut is currently at 11% vs. 18% on Monday. The May meeting finished with a cumulative easing of 10bps at 5.23% and June with a cumulative 24bps at 5.09%.
  • Bloomberg reported that Suki Cooper, a precious metals analyst at Standard Chartered Plc, believed bullion also faced further downside risk given the slowdown in seasonal demand in Asia due to the Lunar New Year holidays.
  • According to MNI’s technicals team, the yellow metal breached key short-term support at $2001.9 (Jan 17 low) with next firm support seen at $1973.2 (Dec 13 low).

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