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Gold price tests $1,800 ahead of US inflation data

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Analysis by Chhea Chhayheng, business manager at PP Link Securities

Gold price tests $1,800 ahead of US inflation data

Gold, its price generally inverse to the dollar, has seen bullish trends return since Monday after dramatically dropping from $1,790 per ounce to $1,774 last Friday.

The August 5 non-farm job figures, according to the US Bureau of Labor Statistics, showed the number of employed people in July was 528,000, more than twice the forecast.

This caused the XAU/USD – gold ounce to US dollar – trading pair to dip almost $20 in 30 minutes.

On Wednesday, the safe-haven asset was hovering around $1,793 per ounce, testing the up price of $1,800.

Chhea Chhayheng, PP Link Securities business manager, said that the fast turn of the gold price indicated that better US job creation could make the dollar only strong in the short term, while gold was still in favour with bulls.

Ambar Warrick said on Investing.com: “Gold prices held on to recent gains on Tuesday as volatility in stock markets ahead of a closely watched US inflation figure this week drove up safe-haven demand.

“A bigger-than-expected dip in inflation is likely to bring down expectations of steep interest rate hikes by the Federal Reserve, and will be positive for gold prices.”

Barani Krishnan on the financial markets platform said: “A weak dollar, even weaker US Treasury yields, and a reversal to the early gains on US stocks also reintroduced some safe-haven buying in gold.

“Economists tracked by Investing.com are projecting the CPI report, due on Wednesday, will show a growth of 8.7 per cent for the year to July, versus the rise of 9.1 per cent during the 12 months to June.

“If true, it will be a sign that the Federal Reserve’s efforts in fighting inflation are starting to work.”

Investing.com’s Krishnan said gold had been “holding its own” recently despite concerns over inflation measures.

“[Inflation-fighting efforts suggest] the Fed will have to keep raising rates in the near future to get inflation as close as possible to its target.

“While the mere threat of rate hikes once sent gold bulls scurrying for cover, recent weeks have shown the yellow metal holding its own against such worries, even after last week’s epic US non-farm payrolls for July that showed a job creation more than twice the level forecast by economists,” he said.

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