- Gold falls back to $2,500 following the release of US inflation data.
- Investors are still debating the extent of the Fed’s rate cut at its September meeting.
- Whether it is a 50 basis point cut or not, it could have a strong impact on Gold.
He Gold (XAU/USD) hits the top of its range and then falls back to $2,500 following the release of US inflation data on Wednesday.
The US consumer price index (CPI) rose 2.5% on an annual basis in August, compared with 2.9% in July and below the 2.6% expected by economists. The monthly CPI rose 0.2%, in line with expectations and unchanged from earlier, according to data from the US Bureau of Labor Statistics.
Core CPI rose 3.2% year-on-year in August, the same as in July and in line with forecasts. Monthly core CPI rose 0.3%, above the 0.2% rise in July and the 0.2% rise expected.
The US dollar rose following the release of the data and gold fell from $2,520 to around $2,500. Gold is negatively correlated with the dollar, and gains in the latter are negative for the former.
Gold range bound ahead of Fed meeting
Gold is broadly trading in a range between $2,480 and $2,530 as investors debate the extent of the Federal Reserve’s rate cut at its meeting on September 17-18. While a standard 25 basis point (0.25%) cut is expected, some believe the Fed could opt for a larger 50 basis point cut. The latter would increase gold’s attractiveness compared to other assets as it is a non-interest-bearing asset.
Gold rose on the back of weaker US Dollar (USD) early on Wednesday following the outcome of the Trump-Harris presidential election debate.
According to most analysts, Vice President Kamala Harris emerged victorious, so the market is pricing in former President Donald Trump’s policies of maintaining the US dollar as the world’s reserve currency by penalizing countries that refuse to use it with tariffs.
That said, the effect is likely to be offset given that the former president is also known for advocating for a weaker dollar because it helps US exports.
As for geopolitical risks, Israel continues to bombard civilian areas in Gaza, and protests by the population calling for a ceasefire to free hostages appear to be falling on deaf ears. The attack on the Al-Mawasi camp, which killed dozens of people earlier this week, has drawn international condemnation and thwarted US efforts to reach a ceasefire agreement.
On the other hotspot, news of a Ukrainian drone attack on Moscow has likely only heightened tensions, which if anything could be increasing safe-haven demand for Gold.
Technical analysis: Gold plummets near all-time highs
Gold (XAU/USD) rolls near its all-time highs and falls back into its sideways range.
XAU/USD 4-hour chart
The yellow metal is likely to continue trading up and down within its multi-week range between $2,480 and the all-time high of $2,531.
However, the long-term trend for gold is bullish, and since “the trend is your friend,” this increases the chances of an upside breakout materializing.
The precious metal has an as-yet-unreached upside target at $2,550, generated after the original breakout of the July-August range on August 14. It is likely to eventually reach its target, assuming the uptrend survives.
A break above the August 20 all-time high at $2,531 would further confirm the bullish continuation towards the target of $2,550.
However, if Gold closes below $2,460, the outlook would change and the bullish trend would be called into question.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
