US July CPI After Gold Finds Its Bearings

Markets are looking for confirmation that tariffs are pushing up consumer prices ahead of US inflation data, as expectations of a Fed cut in September start to fade slowly.

Key Developments Moving the Market

• US July core CPI expected to rise 0.1% to 3.0%.
• FOMC officials have said that it might be time to cut rates "soon."
• Markets see less than a 90% chance of a September rate cut.
• Gold prices spiked around "misinformation" that the yellow metal would be subject to tariffs, with the price normalising at the start of the week.

A Long Wait for the Fed

Tuesday's release of the US July CPI data is likely to be the big event for the week, as traders try to figure out if tariffs pushing up inflation will dissuade the Fed from a rate cut in September. After the last meeting, Fed Chair Jerome Powell insisted that amid a resilient economy. If inflation continues to rise in July, then it could make the case for Fed hawks. But the Fed takes a recess with no meetings in August and won't gather again until mid-September. By that time, fresher August inflation figures will be out, as well as updated labour data. That could mean that markets will look past the upcoming inflation figures unless they are significantly out of line with expectations.

The US July headline CPI is expected to accelerate to 2.8% from 2.7% prior, while the core rate is projected to rise by a similar amount to 3.0% from 2.9% in June. That would be the second consecutive increase in inflation since it bottomed out at 2.8% from March to May. A significant beat could leave traders wondering if the Fed will deliver on the September rate cut. Future markets now price in after being above 90% last week. On the other hand, a miss could leave markets confident enough to price in a second cut by December fully. After dismal job numbers at the start of the month, several might be necessary, including previously "centrists" members such as Neel Kashkari and Mary Daly.

More Upside for Gold?

Gold futures surged to a new record high on Friday amid reports that the US would apply tariffs to gold imports. However, after the close, a White House official said that there would soon be an executive order "", leading the yellow metal to decline. The prospect of lower interest rates is understood to support gold prices, so traders will likely be hoping for a decline in inflation in July that would help dissuade fears that consumer prices were rising due to the effect of tariffs.

Gold Upward Momentum Seems Intact

The spot price of gold has trended upward for the last couple of weeks, with the most recent pullback giving headroom if it were to try to retake previous highs. If that were the case, it would encounter resistance at the prior swing high at $3,410 per ounce, and, by extension, would head toward the July high of $3,430 resistance level. If the pullback intensifies, gold could find support at the swing low of $3,280 before hitting the psychological $3,250 level that it bounced off of back in June.

Source: SpreadEx | Gold, Spot