The gold price (XAU/USD) staged a rebound on Tuesday, despite the US Dollar (USD) consolidating. However, the upside potential for the yellow metal could be tempered as traders await key US inflation data scheduled for later in the week. The recent narrative of higher US interest rates for an extended period has exerted downward pressure on XAU/USD in recent sessions. Nonetheless, safe-haven flows due to escalating tensions in the Middle East could provide temporary support to gold prices.
Investors are closely monitoring important US economic data this week. On Tuesday, the US Producer Price Index (PPI) for April is set to be released alongside Fed Chair Jerome Powell’s speech. Attention will then shift to the US Consumer Price Index (CPI) due on Wednesday. These reports are expected to provide insights into the timing of the Federal Reserve’s initial rate adjustment.
Hotter-than-expected inflation figures could dampen the prospects of a Fed rate cut, thereby weighing on the precious metal. Higher interest rates typically reduce investment demand for gold, as they increase the opportunity cost associated with holding the non-yielding asset. The outcome of these upcoming economic releases will likely influence the direction of gold prices in the near term. Investors are advised to closely monitor developments and prepare for potential market reactions based on the data outcomes.
