Gold prices took a hit on Wednesday, falling 1%, after the release of the U.S. July Consumer Price Index (CPI). The data, which showed inflation cooling less than anticipated, tempered expectations of a 50 basis point interest rate cut by the Federal Reserve in September.
“A rate cut in September is a done deal,” said Tai Wong, an independent metal trader in New York. “But current data shows that the Fed will start raising rates by 25 basis points, which will disappoint the market that likes to raise rates beyond expectations.”
This shift in market sentiment has implications for gold, which is often seen as a hedge against inflation and a safe haven during times of economic uncertainty.
“Market expectations have now turned back to support only a 25 basis point rate cut, so this may weaken some of the momentum in the gold market,” said Phillip Streible, chief market strategist at Blue Line Futures.
However, other analysts believe that gold’s appeal remains strong. “We are still in an environment where geopolitical tensions have increased significantly, which is always good for gold,” said Ben Hoff, head of commodity strategy at Societe Generale.
