Gold exchange-traded funds (ETFs) are trading lower once again. At the time of writing, the Leveraged Gold ETF (07299) is down 6.36% to HK$21.20, while the Value Gold ETF (03081) has fallen 3.34% to HK$19.12.
The move follows the release of the latest US inflation data. According to figures from the US Labor Department, the unadjusted year-on-year Consumer Price Index (CPI) for May came in at 4.2%, matching market expectations. This marks the highest reading since April 2023, up from a previous figure of 3.8%.
Analysts at CITIC Securities note that the US May CPI data largely aligned with forecasts, with elevated oil prices continuing to push the headline inflation rate higher, while core inflation remained moderate. The firm suggests that the risk of a second wave of inflation in the US is low, and the year-on-year headline CPI may have already peaked in this cycle. It is expected to decline gradually until September, followed by a slight rebound, before falling more rapidly by March next year. The focus of the upcoming Federal Reserve policy meeting will likely be on the commentary from the new Chair regarding the current inflation outlook and interest rate levels.
Huaan Fund analysts point out that the April CPI rose 3.8% year-on-year, with core PCE inflation at 3.3%, both remaining elevated. The addition of 172,000 non-farm payrolls in May significantly exceeded expectations, indicating a resilient labor market that reinforces expectations for a tighter monetary policy. Fluctuating US-Iran negotiations have kept oil prices oscillating within a high range of $90 to $100 per barrel. Combined with World Cup preparations and the economic recovery cycle, the short-term resilience of the US economy has surpassed expectations, leading the market to essentially price out any Federal Reserve interest rate cuts for this year.
According to the CME FedWatch Tool, the probability of a rate hike within the year has surged above 70%. The subsequent sharp rise in US Treasury yields has directly increased the opportunity cost of holding non-yielding assets like gold.
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