AXMIN Inc (TSXV: AXM)
AXMIN Inc. (TSXV:AXM) is a Canadian-based exploration and development company with a strong focus on central and West Africa.
During the U.S. trading session, gold prices saw a significant decline, with December gold futures dropping by $29.10 to $2,478.70 per ounce, and September silver futures falling by $0.446 to $27.335. This occurred after the U.S. released CPI data showing a drop to below 3%, along with previous PPI data indicating that U.S. inflation rates are slowing down. However, despite this positive news, gold prices fell instead of rising.
Normally, a continuous decline in inflation pressure strengthens expectations for a Federal Reserve rate cut, which is beneficial for gold. The underlying logic here is that in a high-interest-rate environment, investors can obtain relatively high-risk-free returns by buying treasury bonds or depositing funds into high-yield savings accounts, thus increasing the opportunity cost of holding gold. If rates decrease, some funds might flow into gold and other markets.
However, if the market has already anticipated these expectations, it might lead to a contrary price movement in the short term. This is exactly what happened today in the gold market. Before the inflation data’s release, traders had already forecasted the outcome. Thus, when the data was officially released, the market exhibited a “buy the rumor, sell the fact” behavior, turning good news into bad news. Short-term futures traders took profits and exited, causing gold prices to drop.
Returning to the data, the U.S. Bureau of Labor Statistics reported that the consumer price index (CPI) for July rose by 2.9% year-on-year, marking the fourth consecutive month of declining growth rate, below both the expected and previous readings of 3%. The core CPI rose by 3.2% year-on-year, the slowest growth since early 2021, aligning with market expectations. Additionally, data released on Tuesday showed that the U.S. producer price index (PPI) for July increased by 0.1%, with core PPI flat compared to the previous month.
This week’s weak inflation data supports the dovish stance on U.S. monetary policy, with proponents hoping the Federal Reserve will cut rates soon. According to CME’s “FedWatch,” there is a 56.5% probability of a 25-basis-point rate cut and a 43.5% probability of a 50-basis-point cut in September. However, Wall Street analysts believe the CPI data alone won’t prompt the Fed to make an aggressive 50-basis-point cut.
Although economic data has not driven gold prices higher, safe-haven demand has provided some support to the gold market this week, pushing prices close to historical highs. Market forecasts indicate that tensions in the Middle East will escalate, as Iran and its proxies are expected to launch military retaliation against Israel.
