Gold prices at risk as Fed tightens for longer after US CPI

Gold prices weakened after the release of US inflation data on Thursday, reversing the uptrend in the first 12 hours of the day. The headline CPI reached 3.2% in July, slightly lower than the consensus of 3.3%, but still higher than the previous month's 3%. Meanwhile, the core measure eased slightly to 4.7% from the expected 4.8%.

Bond yields also aimed higher - see chart below. A closer look at the Federal Reserve's monetary policy expectations suggests that while the report didn't change much in terms of short-term interest rate bets, the longer-term outlook seems slightly different. Over a span of more than 3 years, tightening measures have been added the most, indicating that a central bank is likely to be hawkish for a longer period.

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Spot gold was down 0.4% to $1,906.69 per ounce by 1224 GMT, hitting its lowest level since July 6. U.S. gold futures fell 0.4% to $1,938.60.

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Precious metals see 5-week bottom as pressured by USD recovery. At the same time this morning, the US Dollar Index measuring the volatility of the greenback rose above 103 points, taking away the attractiveness of gold to buyers holding other currencies. Gold bulls are also timid as gold's technical factors are falling.

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Gold continues to make downside progress after breaking below the rising support line from February. This has continued to mark a meaningful shift away from what was the dominant uptrend between the end of last year and up until early April. With that in mind, the technical landscape is appearing increasingly bearish.

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