📊 A spike in U.S. inflation fails to dent gold's bullish trend
The gold (XAU) price rose 0.18% on Wednesday even though the U.S. inflation figures were higher than expected, supporting the case for fewer rate cuts by the Federal Reserve (Fed) this year.
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Possible effects for traders
XAUUSD dropped more than 1% after data showed that the U.S. consumer price index (CPI) jumped by 0.5% last month, above the 0.3% expected by the market. The CPI report reinforced the Fed's latest message that it was in no rush to resume cutting interest rates amid growing economic uncertainty. 'With today's CPI data coming in hotter-than-expected, that has put weight on the gold market. Obviously, at this point, any expectation that the market would have had of any type of rate cut later this year has now been put down', said David Meger, director of metals trading at High Ridge Futures.
Despite hotter-than-expected inflation, gold recouped all yesterday's losses and closed above the critical $2,900 level. Investors seem to continue buying the dips in XAUUSD due to strong safe-haven demand. The demand persists due to fears of a global trade war spurred by U.S. President Donald Trump's new tariffs. 'Higher interest rate storyline provided a little bit of pressure on gold, the trend remains positive and trade concerns continue to drive the market', said Peter Grant, vice president and senior metals strategist at Zaner Metals.
XAUUSD rose during the Asian and early European trading sessions. Despite a minor sell-off, even a drop of a few hundred dollars from nearly $3,000 isn't catastrophic, said Daniel Pavilonis, senior market strategist at RJO Futures. He added that with concerns about inflation, debt, and geopolitics, people still invest in gold. Today, traders should focus on another U.S. inflation measure, the U.S. Producer Price Index (PPI), due at 1:30 p.m. UTC. Even if the figures are higher than expected, the bullish trend in XAUUSD will likely remain intact. 'A break above $2,919 may signal the development of a new wave towards the $2,951 to $2,971 range', said Reuters analyst Wang Tao.
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