Gold was priced at about $3,350 on Tuesday, down 1.6% from the day before. This drop followed news about possible peace talks between Russia and Ukraine. In July, U.S. Consumer Price Index (CPI) data showed a 0.2% month-over-month increase, with the annual rate at 2.7%, slightly lower than the 2.8% expected. Core CPI rose 0.3% month-over-month and 3.1% year-over-year, which was above expectations. Gold’s recent low of $3,331 was influenced by rising U.S. Treasury yields and increased market risk appetite. However, the U.S. dollar weakened after the inflation data, providing some support for gold. Notably, the 10-year Treasury yield reached 4.297%, and the 30-year yield was at 4.885%. CPI results raised the chances of a Federal Reserve rate cut in September.

Impact Of Tariff Exemption On Gold

President Donald Trump’s announcement exempting gold imports from proposed tariffs eased market worries. These tariffs could have affected Swiss gold bars, raising concerns about the supply chain. Trade sentiment improved as Trump extended a U.S.-China tariff truce for another 90 days. Upcoming U.S. economic reports include the Producer Price Index and Retail Sales. The current resistance level for gold is at $3,363, while support is at $3,320. Moving averages show a negative short-term momentum, with the Relative Strength Index (RSI) around 37, indicating potential further declines. Gold prices are hovering around $3,350, influenced by evolving geopolitical situations and changing U.S. interest rate expectations. The market is responding to the potential peace talks between Russia and Ukraine, scheduled for later this month in Geneva, which is lowering the demand for safe-haven assets like gold. This creates a tense situation with high headline risk. Recent inflation data has shifted the market’s focus toward a possible rate cut by the Federal Reserve in September. The probability of such a cut, according to the CME FedWatch tool, has risen to over 75% following the CPI report. This expectation is limiting the strength of the U.S. dollar while supporting gold prices, despite the increase in Treasury yields.

Historical Precedents And Current Market Outlook

Historically, a similar situation happened in late 2023 when markets anticipated the end of the Fed’s tightening cycle. Gold initially fell due to high yields, but then started a significant rally. This pattern suggests that the current weakness may represent a buying opportunity for those who are bullish in the long run. Currently, short-term momentum seems negative, which may create chances for bearish trades. The latest Commitment of Traders report indicates that large investors have been cutting back their long positions in gold futures for two weeks. The RSI is at a low of 37, hinting that there may be more declines ahead before reaching a bottom. Investor attitudes towards gold-backed ETFs show this caution, with early August data revealing net outflows of about 15 tonnes. It’s crucial to monitor the $3,320 support level closely; if it is breached, further selling could occur. This could be an opportune time to consider short positions or buy put options. All attention is on the upcoming Producer Price Index and Retail Sales data. Strong retail figures could challenge the narrative of a September rate cut and push gold prices lower, while weak numbers might lead to increased buying. We should be prepared to react to the volatility these reports may generate later this week. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now