Gold price attracted some dip-buying following the overnight decrease in the US CPI.
Gold prices (XAUUSD) fell on Wednesday as investors reduced their expectations for more aggressive policy easing by the Federal Reserve (Fed) following the release of US consumer inflation data.
Persistent geopolitical worries and Fed rate drop predictions continue to bolster the metal.
However, persisting geopolitical worries arising from ongoing wars in the Middle East, together with increased acceptance for an impending start of the Fed’s rate-cutting cycle and muted US Dollar (USD) price action, boost the metal To restore good momentum on Thursday.
Meanwhile, lowered bets on a 50 basis point (bps) Fed rate cut in September resulted in a minor recovery in US Treasury bond rates, perhaps discouraging traders from placing aggressive bullish bets around the non-yielding gold price. Aside from that, the overall optimistic tone in the equities markets may operate as a headwind for the safe-haven precious metal. Nonetheless, the underlying backdrop suggests further advances ahead of major US macro data later this Thursday.
Daily Market Movers: Gold price gains strength from geopolitical risk and weak USD demand.
Data published on Wednesday revealed that US consumer prices recovered as expected in July, dashing hopes for a greater interest rate cut by the The Federal Reserve met in September.
In actuality, the US Labor Department’s Bureau of Labor Statistics (BLS) announced that the headline US CPI increased moderately by 0.2% in July, after decreasing 0.1% the previous month.
The annual increase in the CPI, on the other hand, slowed and went below 3% for the first time in nearly three and a half years, indicating that the Fed inflation targets are still being met.
The core CPI, which excludes volatile food and energy costs, rose by 0.2% in the reporting month and fell to 3.2% in the year to July from 3.3% in June.
According to the CME Group’s FedWatch Tool, investors now perceive a 36% chance of a 50-basis point rate drop at the upcoming FOMC meeting, compared to 50% prior to US Consumer Price Index statistics.
This caused a late recovery in US Treasury bond yields, allowing the US Dollar to attract some buyers at lower prices while weighing on the non-yielding yellow metal.
USD increase and a favorable risk tone may limit the gains for the XAUUSD.
The USD Index (DXY) gets some follow-through traction on Thursday, acting as a negative for the Gold commodity, though elevated global concerns continue to provide support.
Mediators are trying to restart cease-fire talks between Israel and Hamas on Thursday, despite the potential of an imminent Iranian attack on Israel within the next few days.
Traders are now looking to the US economic calendar, which includes Retail Sales, Weekly Initial Jobless Claims, and regional manufacturing indexes, for short-term opportunities.
