The price of gold (XAU/USD) has continued its upward trend this week, pushing higher from the $2,485 mark. On Wednesday, the precious metal saw further gains for the third consecutive day, supported by bullish momentum. The steady rise has lifted gold to a new weekly high as bulls look to break through the resistance level at $2,525-2,526. Meanwhile, the US Dollar (USD) has weakened, partly due to growing expectations of a dovish stance by the Federal Reserve (Fed). This has resulted in increased demand for non-yielding assets such as gold.
In this article, we’ll examine the latest developments in the gold market and how upcoming US Consumer Price Index (CPI) data may shape future price trends.
US Dollar Weakness Supports Gold Price Surge Ahead of US CPI Report
The USD has struggled to maintain its recent gains, pulling back from its monthly peak. Market participants expect the Fed to adopt a more accommodative policy, leading to lower interest rates. As the Fed’s stance becomes more dovish, gold benefits as a safe haven asset, attracting inflows.
Gold’s rise has also been fueled by broader market uncertainty and a weakened risk appetite. This risk-off sentiment has further bolstered gold’s climb closer to its all-time peak.
Focus on US CPI Report
Before the release of the US CPI report, investors remain cautious, limiting significant movements in gold. The inflation data is crucial in shaping market expectations regarding future Fed decisions. The CPI figures will provide insight into whether inflationary pressures have eased, which would likely lead to further speculation on a Fed rate cut in September.
The headline CPI is forecasted to rise by 0.2% in August, with the yearly rate possibly slowing to 2.6%. Additionally, the core CPI, excluding food and energy, is expected to remain steady at 3.2% year-over-year.
Market Reactions to Inflation Data
If inflation continues to cool, gold price could rise further as the Fed’s likelihood of cutting rates grows. On the other hand, if inflation data surprises to the upside, the reaction in the gold market may be more muted. Investors seem to have already priced in a September rate cut, so stronger inflation data might not drastically impact gold prices.
Market sentiment reflects a 67% probability of a 25-basis-point rate cut at the upcoming Fed meeting, according to the CME FedWatch Tool. This anticipation of monetary easing supports gold’s upward momentum.
Technical Outlook for Gold
From a technical standpoint, gold appears well-positioned to continue its climb above the $2,525-2,526 resistance level. This zone represents a key point in the current trading range, and a breakthrough could signal a renewed bullish trend. If gold surpasses the $2,532 mark, traders may view it as a trigger for further upside movement.
Despite this, gold’s downside risks remain protected around the $2,500 psychological level, with additional support at $2,485 and $2,470. A decisive break below these levels could lead to further selling pressure, potentially driving the price toward the 50-day Simple Moving Average (SMA) near $2,450.
Conclusion
The gold market remains driven by a combination of weak USD performance and market anticipation of US CPI data. Investors are closely monitoring inflation trends, which will influence the Fed’s monetary policy decisions. Although gold bulls maintain control, traders may pause ahead of the CPI release, waiting for clear market signals. To stay updated on the latest gold price movements and forecasts, check out our daily gold updates here.
For further insights and analysis on the gold market, visit Daily Gold Signal.
