- Gold is trading slightly below its all-time high of $2,480 per ounce, which it reached on August 12, as markets assessed the latest price data for hints about the Federal Reserve's monetary policy outlook.
- Immediately after the announcement, gold prices experienced profit-taking selling, dropping to $2438 per ounce.
- Prior to the data release, and according to our free trading recommendations page, we sold gold from its highest levels, and the recommendation yielded a good profit.
- The overall trend for gold remains upward for a longer period.
According to the results of the economic calendar, US consumer inflation fell to 2.9% in July, which is less than the market’s expectations of remaining unchanged at 3%, while the core index fell to its lowest level in more than three years at 3.2%. However, high inflation in housing and transportation services has prompted markets to pare back the size of the Federal Reserve’s expected September rate cut, denting the strong momentum in gold prices due to bullion’s relationship with interest-bearing assets.
Meanwhile, ongoing attacks between Israel and its neighbors in Gaza and Lebanon have kept geopolitical risks in financial markets, supporting gold and other safe-haven assets.
As for the factors affecting the gold market, the US dollar is at a 7-month low. According to trading, the US dollar index DXY fell to 102.2 on Wednesday, returning to lows not seen since mid-January, as the US consumer price index report came in largely in line with expectations and continues to point to a moderate contractionary trend. Core and headline CPI figures were in line with expectations, but the headline annual rate unexpectedly fell to 2.9%, the lowest since March 2021. Producer prices rose 0.1% month-on-month in July, missing expectations for a 0.2% increase, while core producer prices were unexpectedly flat.
Overall, traders continue to bet that the Federal Reserve will start cutting US interest rates in September, with the odds of a 50-basis point cut hovering around 46%.
Another factor affecting the gold market, the US 10-year Treasury yield is approaching a one-year low. According to trading, the US 10-year Treasury yield erased its previous high and swung towards 3.8% on Wednesday, not far from a one-year low as markets continued to assess the latest inflation data and its impact on credit costs. US consumer inflation fell to 2.9% in July, compared to expectations of an unchanged 3%, and the core index fell to a 2021 low of 3.2% as expected.
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Gold Price Forecast and Analysis Today:
Gold prices will remain near their record highs, as new evidence of weak US inflation has strengthened expectations that the Federal Reserve may implement a larger interest rate cut in September. Additionally, gold prices continue to benefit from its safe-haven appeal amid rising geopolitical tensions, as markets closely monitor developments regarding the impending retaliatory strike by Iran on Israel and Ukraine's incursion into Russia.
The precious metal has gained nearly 20% this year. Along with interest rate cut expectations, it has also been supported by strong purchases from central banks and strong demand from Chinese consumers. Furthermore, the escalating tensions in the Middle East have also boosted gold's appeal as a safe-haven asset. At the same time, net bullish gold bets by money managers have reached a five-week low, according to weekly data from the Commodity Futures Trading Commission.
Ultimately, we still prefer to buy gold on every downtrend and the overall trend will remain up as long as it is above the $2,400 resistance.
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