Gold prices rallied sharply on Tuesday, surging back toward the $4,100 per ounce threshold after U.S. inflation data came in significantly cooler than expected, reinforcing expectations that the Federal Reserve will hold interest rates steady through the remainder of the year. According to Kitco News, spot gold last traded at $4,087.40 an ounce, up more than 2% on the day, after posting a nearly $60 jump in its immediate reaction to the inflation report. The precious metal is now testing a key resistance level at $4,100, though prices have yet to break decisively above that mark.
The catalyst for the move came from the U.S. Bureau of Labor Statistics, which reported Tuesday that the Consumer Price Index (CPI) fell 0.4% in June, following a 0.5% increase in May. The reading was substantially better than the consensus forecast of a 0.1% decline, and the Bureau noted that this monthly decrease was the largest since April 2020, when the index fell 0.8%.
On an annual basis, headline inflation rose 3.5% over the past 12 months, down sharply from the prior month's reading of 4.2%. Economists had anticipated a year-over-year increase of 3.8%, making the actual figure a notable downside surprise. Core CPI, which excludes volatile food and energy prices, was unchanged in June after rising 0.2% in May.
Consensus estimates had called for another 0.2% monthly gain. On an annual basis, core inflation came in at 2.6%, down from 2.9% in May. The softer inflation print has provided what Kitco News describes as a "critical lifeline" for the gold market, as easing price pressures reduce the urgency for further monetary tightening by the Federal Reserve.
Lower interest rate expectations tend to be supportive for gold, which bears no yield and becomes comparatively more attractive when the opportunity cost of holding it declines. Despite the strong intraday move, gold has yet to clear the $4,100 resistance level, and market participants will be closely watching whether the precious metal can sustain its momentum and achieve a definitive breakout above that technical threshold. Source: Kitco News, reporting by Neils Christensen.
Source: kitco.com