Gold prices traded within a narrow range on Wednesday as investors eagerly awaited a key U.S. inflation report that could provide further insight into the Federal Reserve’s interest rate decisions.
As of 0229 GMT, spot gold saw a modest rise of 0.2%, reaching $2,367.79 per ounce, while U.S. gold futures climbed 0.3% to $2,374.10 per ounce.
In his testimony before the Senate, Federal Reserve Chair Jerome Powell noted that inflation had shown signs of improvement in recent months, suggesting that “more good data would strengthen” the case for a looser monetary policy. Powell is set to address the House later in the day, with markets keenly anticipating any hints about future rate cuts.
“With the recent run of weaker U.S. data, the case has been built around a September rate cut, but with the Fed Chair still wanting to see more good data, further inflation progress will be needed to offer more confidence for policymakers to open the door to rate cuts,” said IG market strategist Yeap Jun Rong. Currently, traders see a 73% chance of a rate cut in September, according to the CME Group’s FedWatch Tool. Lower interest rates tend to enhance the appeal of non-yielding assets like gold.
The June consumer price index (CPI) data, scheduled for release on Thursday, is expected to show a 0.1% rise in headline prices for the month, with core prices increasing by 0.2%. This would result in annual gains of 3.1% and 3.4%, respectively.
“Any surprise resurgence in pricing pressures may challenge the Fed’s inflation fight, which could raise calls for a delayed policy easing process. That may weigh on gold, which could see prices fall back towards the $2,300 level of support,” Yeap added.
Meanwhile, global physically-backed gold exchange-traded funds experienced a second consecutive month of inflows in June, driven by increased holdings from Europe- and Asia-listed funds, according to the World Gold Council.
In other precious metals, spot silver rose by 0.3% to $30.89 per ounce, platinum steadied at $984.55, and palladium gained 0.1% to $981.37.
As the market braces for the forthcoming inflation data, gold prices are expected to remain sensitive to any signals that could alter the current trajectory of U.S. monetary policy.