Gold prices are showing resilience above the $1,910 mark, rebounding from recent declines as they trade in the early hours of the Asian session on Wednesday. This upward movement can be attributed to a weakening US Dollar (USD).
However, the outlook for gold remains uncertain due to market caution in anticipation of forthcoming US inflation data, scheduled for release later in the North American session.
The US Consumer Price Index (CPI) is expected to reflect a 0.5% month-on-month increase, marking an improvement from the previous month’s 0.2% reading. Concurrently, the Core CPI, which excludes the volatile food and energy sectors, is predicted to maintain stability at 0.2%.
These figures have the potential to shed light on broader inflationary trends within the US economy and may influence market sentiment and trading decisions, especially regarding the USD-denominated precious metal.
Investors have been contemplating the likelihood of a 25-basis point (bps) interest rate hike by the US Federal Reserve (Fed), with the possibility of it occurring in either the November or December meetings. In tandem with this, the Fed is expected to sustain elevated interest rates over an extended period. Heightened inflation could reinforce the hawkish sentiment, potentially bolstering the US dollar and exerting downward pressure on gold prices.
The US Dollar Index (DXY), which gauges the USD’s performance against the other six major currencies, is currently in its fourth consecutive losing session, hovering around 104.50 at the time of this report. Nevertheless, the greenback is poised to maintain its resilience, underpinned by ongoing economic expansion in the US.
US Retail Sales growth data, scheduled for release on Thursday, is expected to demonstrate a slight deceleration. Consensus forecasts for August project a 0.2% increase, although this represents a dip from the previous month’s 0.7% growth. These figures could provide insights into consumer spending patterns and have the potential to impact market sentiment.