On Wednesday (September 11th) during the US trading session, the gold market experienced severe fluctuations due to the impact of US CPI data. After the release of US CPI data, spot gold fell sharply to $2500 per ounce, nearly $30 lower than the intraday high.

The possibility of a 50 basis point interest rate cut due to the US CPI report has suffered a significant blow

Gold prices fell on Wednesday as the US CPI report prompted investors to lower their expectations of a significant interest rate cut by the Federal Reserve next week, leading to a strengthening of the US dollar and US Treasury yields and putting pressure on gold prices.

The Bureau of Labor Statistics, a subsidiary of the US Department of Labor, reported on Wednesday that the US Consumer Price Index (CPI) rose 0.2% month on month in August, in line with market expectations. In August, the US CPI rose by 2.5% year-on-year, falling for the fifth consecutive month, in line with market expectations and lower than the previous value of 2.9%.

However, it is worth noting that the core CPI in the United States rose by 0.3% month on month in August, the largest increase in four months, and the increase was higher than the expected 0.2%. Economists believe that the core inflation rate better reflects potential inflation than the overall CPI. The core CPI in the United States rose by 3.2% year-on-year in August, consistent with the forecast.

Institutional analysis suggests that higher than expected US core inflation data will become a concern for the Federal Reserve's 50 basis point interest rate cut next Wednesday. The current focus is on the core CPI monthly rate data, which tends to increase concerns about stubborn inflation. Those among FOMC members who are concerned about a too rapid or decisive shift in monetary policy will certainly strongly oppose a 50 basis point rate cut next week.

Premier Miton Investors Chief Investment Officer Neil Birrell commented on the US CPI report, stating that the possibility of the Federal Reserve cutting interest rates by 50 basis points next week has been significantly hit by this number.

According to CME's "Federal Reserve Watch" tool, the market currently expects an 87% chance of a 25 basis point rate cut in the United States, compared to a 71% chance before the data was released.

After CPI data showed that the Federal Reserve may only cut interest rates by 25 basis points in September, the US dollar index rose sharply in the short term, recovering all the losses lost during the day and reaching a intraday high of 101.82 at one point. The US dollar index ultimately closed up about 0.1% at 101.75.

Spot gold fell sharply to $2500.74 per ounce after the release of US CPI data, dropping nearly $30 from the intraday high of $2529.13 per ounce.

The gold price subsequently rebounded from its low point. Spot gold ultimately closed down 0.2% on Wednesday, at $2511.28 per ounce.

Analyst Christian Borjon Valencia pointed out that gold prices fell from Wednesday's high of $2529 per ounce after the possibility of a 25 basis point Fed rate cut increased with US inflation data. The rise in US treasury bond bond yields and the strengthening of the US dollar put pressure on non gold. The yield of 10-year US treasury bond bonds climbed 1.5 basis points to 3.655%.

Bob Haberkorn, Senior Market Strategist at RJO Futures, said, "Inflation still exists, and consumers still feel this way. If the Federal Reserve cuts interest rates by 50 basis points, it means they will give up on inflation. At this critical moment, the Federal Reserve is almost forced to only cut interest rates by 25 basis points

TaiWong, an independent metal trader in New York, said, "The rise in core CPI will more or less consolidate the possibility of the Federal Reserve cutting interest rates by 25 basis points next week. Gold may have to wait for a while longer to break the historical high of prices

On Thursday, the United States will release the Producer Price Index (PPI) report, which may also help the market evaluate the scale of the Federal Reserve's September interest rate cut. In addition, investors are also paying attention to the report on initial jobless claims in the United States.

How to trade gold?

Analyst Christian Borjon Valencia pointed out that gold prices have been suppressed, consolidating within the range of $2500-2531 per ounce. The Relative Strength Index (RSI) remains flat on the neutral line, indicating that neither buyers nor sellers have control over the situation.

Valencia stated that if the gold price breaks the historical high of $2531 per ounce, the next resistance level will be the $2550 per ounce mark. Once the latter is surpassed, the next target will be the psychological barrier of $2600 per ounce.

Valencia added that, on the contrary, if the gold price falls below $2500 per ounce, the next support level will be the August 22 low of $2470 per ounce. In the event of further weakness, the next support area will be the confluence of the May 20th high and the 50 day simple moving average (SMA) line (between $2450-2440 per ounce).