The price of gold rose by about 0.3%, while market participants are preparing for the publication of important US data that will help clarify the prospects for the Fed's monetary policy.
The producer price index for July will be published tomorrow, and on Wednesday the consumer price index for July will be released. The June CPI report was one of the most encouraging reports the FOMC has received since it started raising rates. Food and energy prices put the most pressure on the CPI, which fell by 0.1% over the month. Excluding food and energy, the core CPI rose by a modest 0.1%, which was the smallest increase since the beginning of 2021. Perhaps the most encouraging in the report were prices for core services, which rose by just 0.1%, compared with an average monthly increase of 0.4% over the previous six months. Prices of core goods continued deflationary dynamics for the fourth month in a row, falling by 0.1%. With prices of core goods steadily declining and the price outlook for core services remaining moderate through the end of the year, the risks to inflation and employment under the FOMC's dual mandate are better balanced. The CPI is expected to have risen slightly in July, with the annual rate slowing to 2.9% from 3% in June. The core CPI likely rose 0.2% in July on the back of a recovery in some of the most volatile “super core" components. Meanwhile, experts said that further inflation progress reflected in the CPI data could see gold eye for a retest of its all-time high once more. According to the CME FedWatch Tool, markets see a 46.5% probability of a 0.5% rate cut in September, and a 48.0% probability of 0.25% rate cut in November. Non-yielding bullion's appeal tends to shine in a low interest rate environment.
Gold was also supported by the uncertain situation in the Middle East. Yesterday, the Palestinian militant group Hamas asked the mediators to present a plan based on previous negotiations, instead of participating in new negotiations on a ceasefire agreement in the Gaza Strip, which raised doubts about its participation in Thursday's meeting.