Three-Month Lows Ahead Of U.S. CPI

Gold sits a little below neutral levels to print $1,837/oz at typing, operating a little above fresh 3-month lows made earlier in the session amidst an uptick in U.S. real yields.

• To recap, gold closed ~$16/oz lower on Tuesday, notching a second consecutive daily loss. The move lower came amidst a flurry of mildly hawkish Fedspeak, with officials continuing to voice support for back-to-back rate 50bp hikes in June and July while broadly refusing to rule out 75bp hikes later in ‘22, flagging data-dependence.
• To elaborate, Cleveland Fed Pres Mester (with her and NY Fed Pres Williams being the only “first-time” post-FOMC speakers on Tuesday) stated that back-to-back 50bp hikes for June and July made “perfect sense”, but cautioned that “we don’t rule out 75 forever”.
• July FOMC dated OIS now price in a shade under 2 x 50bp hikes for the next two meetings (~98bp), largely consistent with growing Fed consensus for the same. U.S. dated OIS markets are pricing in a cumulative ~190bp of tightening for calendar ‘22, with the probability re: 3 x 50bp hikes for the year continuing to edge downwards since the May FOMC held last week.
• Looking ahead, U.S. CPI will cross later on Wednesday (1330 BST).
• From a technical perspective, gold has broken immediate support at $1,848.8/oz (76.4% retracement of the Jan28-Mar8 rally), exposing further support at $1,821.1/oz (Feb 11 low).