Gold price is testing three-month low ahead of CPI data

Following a brief bounce ahead of the key inflation data in the United States, looming CPI figure, gold price is under selling pressure. For additional direction, investors await US inflation data. The price of the precious metal, which is currently selling at $1917.71, has decreased by almost -0.40%.

The price of gold declines when the US dollar strengthens due to market players’ declining capacity for risk-taking. Despite the fact that Fed policymakers believe that the central bank’s interest rates have reached their top for the time being, the precious metal is unable to maintain recovery. Also, if inflation slows down further and job growth slows down much more, the Fed may contemplate lowering interest rates next year.

For September’s monetary policy guidance, investors await Thursday’s United States Consumer Price Index (CPI) data. Investors expect a rebound in headline CPI after a soft spell as recovered oil prices lift gasoline prices. US hiring slowed in July while the US Unemployment Rate remains near historic lows. Now July’s inflation data will set a base for the next interest rate decision.

Gold price fails to sustain a recovery move despite the US Dollar remaining sideways ahead of United States inflation data.

Earlier on the day, the US Dollar Index senses heat due to neutral interest rate guidance from Federal Reserve policymakers. Philadelphia Fed President Patrick Harker said on Tuesday that the central bank could hold interest rates steady at this point and let monetary policy do its job. Investors should note that Fed Harker is not a voting member this year.

New York Fed President John Williams thinks interest rates have peaked for now and expects that the central bank will consider rate cuts next year. The US Dollar Index corrects sharply to near 102.40 as market sentiment turns positive, supported by the People’s Bank of China’s (PBoC) stronger-than-expected exchange rate fixing.

Fed’s Michelle Bowman has made hawkish remarks that the US Dollar cannot remain at high levels as long as still-high inflation and a positive labour market continue to support additional policy tightening.

Investors are turning their attention to the inflation statistics, which will be released on Thursday at 12:30 GMT, after a slowdown in hiring and consistent pay increases. According to estimates, the headline and core CPI, which do not include volatile food and oil prices, continued to grow by 0.2% each month in July. In contrast to June’s figure of 3.0%, the annual headline CPI is predicted to increase to 3.3%. Core inflation, on the other hand, is predicted to slightly slow down from its previous estimate of 4.8% to 4.7%.

A significant increase in global oil prices supports the consensus increase in the headline CPI.
If inflationary pressures pick up, the Fed may have to decide whether to keep raising interest rates.

According to Bloomberg, the US government intends to prohibit investment in Chinese artificial intelligence (AI) firms. Only Chinese businesses that generate more than 50% of their revenue from the fields of AI and quantum computing will be the focus of the administration’s strategy.
The National Federation of Independent Business (NFIB) reported that lessening concerns about inflation predictions caused its Small Business Optimism Index to rise to 91.1 last month, the highest level since November 2022.

On Tuesday, the US Census Bureau reported a Goods & Services Trade Balance deficit at a three-month low of $65.5 billion amid a decline in merchandise imports due to moderating consumer demand.