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Category: Forex News, News

Gold Prices Forecast: XAU/USD Jumps as Fed Hints at Rate Cuts Ahead of CPI Data

Fed Chair Signals Potential Rate Cut

Federal Reserve Chair Jerome Powell’s recent congressional testimony has sparked renewed interest in gold. During his appearances before Senate and House committees, Powell indicated that the Fed is moving closer to a rate cut decision, while maintaining caution about declaring victory over inflation.

Inflation Data in Focus

The Consumer Price Index (CPI) report, due later today, is expected to show core inflation rising 0.2% month-on-month in June. Economists surveyed by Dow Jones forecast June’s headline CPI to reflect a 0.1% rise monthly and 3.1% annually, down from May’s 3.3% yearly increase. The Producer Price Index (PPI) follows on Friday. These reports are crucial for gauging the Fed’s next moves.

Market Expectations Shift

According to the CME FedWatch tool, markets are now pricing in a more than 71% chance of a Fed rate cut in September, a significant increase from the near-even odds a month ago. This shift in expectations has put pressure on the U.S. dollar, making gold more attractive to investors holding other currencies.

Treasury Yields and Dollar Performance

U.S. Treasury yields remained stable as investors await the inflation data. The dollar edged 0.2% lower against a basket of currencies, with traders hesitant to take new positions before the CPI report. The Fed’s 2% inflation target remains a key focus, with Powell suggesting that the central bank might not wait for inflation to reach this level before considering rate cuts.

Analyst Perspectives

Lukman Otunuga, senior research analyst at FXTM, noted that “Gold continues to shine on rising Fed rate cut bets following dovish comments by Powell during his congressional testimony.” Zain Vawda, market analyst at MarketPulse by OANDA, added that a softer-than-expected CPI could push gold above $2,400.

Market Forecast

The short-term outlook for gold appears bullish. If CPI data comes in softer than expected, gold prices could potentially break above the $2,400 mark. The current trend in monetary policy and sustained gold demand indicate the ongoing bull market in gold could persist.


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