Gold prices rose in the European market on Wednesday, resuming gains after a two-day pause and moving back toward a three-week high. This came as the recent rally in the US dollar paused in the foreign exchange market.
Following a second consecutive monthly rise in US consumer prices, investors are now awaiting further inflation data, which will offer stronger clues about the likelihood of interest rate cuts by the Federal Reserve this year.
The Price
Gold prices rose by 0.55% to $3,343.10, up from the session’s opening level of $3,324.38, after hitting a low of $3,323.69.
At Tuesday’s settlement, gold prices fell by 0.6%, marking a second straight daily loss due to continued profit-taking from the recent three-week high of $3,375.01 per ounce.
US Dollar
The US Dollar Index fell by 0.2% on Wednesday, retreating from a three-week high of 98.70, reflecting a decline in the US currency against a basket of major and minor rivals.
Aside from profit-taking, the dollar’s drop is also due to investor reluctance to open new long positions ahead of upcoming inflation data.
US Interest Rates
• On Monday, President Donald Trump renewed his criticism of Federal Reserve Chairman Jerome Powell, stating that interest rates should be at 1% or lower.
• The Consumer Price Index rose by 2.7% annually in June — its second monthly increase — up from 2.4% in May and exceeding the market’s forecast of 2.6%. This marks the highest reading since February.
• Price increases in goods such as coffee, audio equipment, and home furniture contributed to the rise in June inflation, with imported goods seeing significant hikes due to Trump’s tariffs.
• Following the data, CME Group’s FedWatch tool showed a drop in the probability of a 25-basis-point rate cut in July from 5% to 2%, while the likelihood of rates staying unchanged rose from 95% to 98%.
• For September, the odds of a 25-point cut dropped from 62% to 55%, while the chances of no change rose from 38% to 45%.
• According to data from the London Stock Exchange, traders are currently pricing in less than 50 basis points of total rate cuts for the rest of the year, with the first expected 25-point cut now projected for October.
• To reassess these expectations, investors are awaiting June’s Producer Price Index (PPI), due later today, which is considered a leading indicator of July’s consumer inflation trends.
Gold Outlook
• Brian Lan, managing director at Singapore-based dealer Gold Silver Central, said: “Gold is currently stable with a slight downward bias, especially with the US dollar holding strong.”
• He added: “However, many countries are still negotiating with the US over tariffs. There’s still a lot of uncertainty in the market, and many are seeking safe havens.”
SPDR Fund
Gold holdings with SPDR Gold Trust — the world’s largest gold-backed exchange-traded fund — remained unchanged yesterday for the second consecutive day, with total holdings steady at 947.64 metric tons.
