Gold Hits Two-Month High; CPI Data Key
Gold prices extended their gains for a third consecutive session on Tuesday, reaching their highest level in over two months. Spot gold rose approximately 1% to US$4,432.74 per troy ounce at 02:17 GMT—its highest level since June 5—while US gold futures climbed 1.7% to US$4,492.60. The rally indicates strong buying momentum following a prior correction that saw gold prices dip toward the US$4,000 mark.
The rise in gold prices was driven by a combination of FOMO (fear of missing out) among investors who had missed the earlier dip, short-covering by speculators, and a renewed flow of funds into safe-haven assets. IG market analyst Tony Sycamore anticipates that gold has room to break past current levels in the medium term, potentially paving the way for a stronger recovery toward US$5,000 if the positive momentum holds.
Investor attention is now focused on the US CPI report due Wednesday and the PPI report on Thursday. Both datasets will provide crucial clues regarding the Federal Reserve's policy direction, especially after a weak July employment report led markets to scale back expectations for an interest rate hike at the upcoming meeting. The Fed had previously held rates steady at its July meeting, despite three officials favoring a hike. If economic data continues to soften without a significant spike in inflation, expectations for tighter policy could diminish further, putting downward pressure on the dollar.
Safe-haven sentiment has also been bolstered by US-Iran geopolitical tensions. President Donald Trump countered Iran's conditions for a deal by demanding compensation for war casualties, attacks, and protests—a move that could further complicate efforts to reopen the Strait of Hormuz. This uncertainty is keeping demand for gold robust while simultaneously heightening risks for global energy markets.
Market Impact:
The bias for gold remains bullish after successfully breaking the US$4,400 level and hitting a more-than-two-month high. Technical momentum, short-covering, FOMO, and safe-haven demand are the primary drivers of the current rally.
However, the US CPI report represents the next major test. If inflation comes in lower than or in line with expectations—without any upside surprises—markets may further discount the likelihood of hawkish Fed policies. This could put downward pressure on the dollar and yields, creating a golden opportunity for gold prices to continue rising.
Conversely, a CPI reading significantly hotter than anticipated could reignite expectations for interest rate hikes, pushing the dollar and yields higher while triggering profit-taking in gold. Given the current momentum, the US$5,000 level is once again being discussed, though the path there remains heavily dependent on inflation trends, Federal Reserve policy, and geopolitical developments in the Strait of Hormuz.
Source: Newsmaker.id
