Gold prices experienced a brief rally before retreating to around $2,500 per ounce after the U.S. inflation data was released on Wednesday.
The U.S. Consumer Price Index (CPI) increased by 2.5% year-over-year in August, down from July’s 2.9% and below the 2.6% forecast by economists. On a monthly basis, CPI rose by 0.2%, matching previous increases and forecasts, according to the U.S. Bureau of Labor Statistics.
Core CPI, excluding food and energy, rose by 3.2% annually in August, consistent with the previous month and expectations. However, the monthly core CPI increased by 0.3%, surpassing the 0.2% rise in July and the forecasted 0.2%.
The U.S. Dollar (USD) strengthened following the release, causing gold prices to drop from the $2,520 range to approximately $2,500. Gold typically moves inversely to the USD, meaning a stronger dollar often leads to lower gold prices.
Gold Trades Within Range Ahead of Fed Meeting
Currently, gold is trading within a range of about $2,480 to $2,530 as investors await the Federal Reserve’s decision on interest rates at its meeting on September 17-18. While a standard 25 basis points (bps) cut is widely anticipated, some analysts speculate that the Fed might opt for a more substantial 50 bps reduction. A larger cut could enhance gold’s appeal as a non-interest-bearing asset compared to other investments.
Market Dynamics and Geopolitical Factors
Earlier on Wednesday, gold prices received a boost from a weaker USD following the presidential debate between Vice President Kamala Harris and former President Donald Trump. Analysts generally viewed Harris as the debate winner, leading to reduced market expectations for Trump’s policies, which often emphasized maintaining the USD’s global dominance through tariffs.
However, Trump’s stance on a weaker dollar, which benefits U.S. exports, might counterbalance this effect.
Geopolitical tensions also impact gold prices. Ongoing conflict in Gaza, including recent attacks on civilian areas and the international community’s condemnation, along with heightened tensions following a Ukrainian drone attack on Moscow, may further drive safe-haven demand for gold.
