Gold prices rose in the European market on Tuesday, resuming their gains after a temporary pause the previous day, approaching the highest level in three weeks, supported by the current decline in US dollar levels in the foreign exchange market.
This comes ahead of the release of key inflation data in the United States later today, which will provide strong clues regarding the likelihood of US interest rate cuts during the second half of this year.
The Price
• Gold prices today: Gold prices rose by about 0.7% to $3,365.65, from the opening level of $3,343.57, and recorded the lowest level at $3,341.33.
• Upon settlement on Monday, gold prices lost 0.35% — the first loss in the last four days — due to correction and profit-taking, after earlier touching a three-week high of $3,375.01 per ounce during the session.
US Dollar
The dollar index fell on Tuesday by 0.2%, retreating from its highest level in three weeks at 98.14 points, reflecting a decline in US currency levels against a basket of major and minor currencies.
Aside from profit-taking, the dollar is weakening due to reluctance to build new long positions ahead of the release of key US inflation data.
US Interest Rates
• US President Donald Trump renewed his criticism of Federal Reserve Chair Jerome Powell on Monday, saying that interest rates should be at 1% or lower.
• According to the FedWatch tool from CME Group: The probability of a 25-basis-point interest rate cut at the July meeting is currently priced at 5%, while the probability of holding rates steady stands at 95%.
• The probability of a 25-basis-point cut at the September meeting is currently priced at 62%, while the probability of no change is at 38%.
• According to data from the London Stock Exchange, traders are currently pricing in about 50 basis points of rate cuts by the end of the year, with the first quarter-point cut expected in October.
US Inflation Data
To reprice the above probabilities, traders are awaiting the release of key US inflation data for June later today, which is expected to significantly influence the Federal Reserve’s monetary policy path.
At 13:30 GMT, the Consumer Price Index (CPI) is expected to show an annual increase of 2.6% in June, up from 2.4% in May, while the Core CPI is expected to rise by 3.0% annually, up from 2.8% in the previous month.
Outlook for Gold Performance
• Chief Market Analyst at KCM Trade, Tim Waterer, said: “Gold has proven in the past to be a preferred asset during rising tensions over tariffs, and the precious metal’s move toward $3,350 is evidence of that pattern repeating.”
• He added: “However, the rise in US Treasury yields and the strengthening of the US dollar have created headwinds… and for gold to advance further toward $3,400, it may require a retreat in the value of the US dollar or Treasury yields in the absence of any intensifying geopolitical events.”
