Price of Gold Fundamental Daily Forecast – Rangebound as Traders Hope for Clarity from US CPI Data

Gold futures are trading nearly flat after giving up earlier gains as the U.S. Dollar turned higher and Treasury yields steadied ahead of the release of the U.S. consumer inflation report at 12:30 GMT. Volume and volatility are also being suppressed as investors await Federal Reserve Chairman Jerome Powell’s testimony to Congress on Wednesday and Thursday.

At 10:15 GMT, August Comex gold futures are at $1808.10, up $2.20 or +0.12%. This is down from an intraday high of $1813.80.

Treasury Yields Rise Ahead of Inflation Data Update

U.S. Treasury yields rose early Tuesday, ahead of the release of the June inflation data, later in the morning. The yield on the benchmark 10-year Treasury note rose to 4 basis points to 1.368%. The yield on the 30-year Treasury bond climbed 1 basis point to 1.994%.

Dollar Traders Await Inflation Data

The dollar rebounded after early weakness on Tuesday ahead of U.S. inflation data. The possibility of U.S. stimulus withdrawal – brought to the fore by a surprise shift in tone last month from the Federal Reserve – has boosted the dollar in recent weeks despite a renewed rise in coronavirus cases in many parts of the world. This has helped put a lid on gold prices despite three consecutive weekly gains.

Daily Forecast

If inflation data comes in lower than the estimate, the Fed would feel slightly less inclined to ease its asset purchases, which should benefit gold, but if policymakers are concerned about inflation, they are more likely to considered tapering its bond purchases, weighing on gold prices.

Economists polled by Reuters expect the U.S. CPI to have risen 0.5% from May and 4.9% from a year earlier. Traders expect a miss on either side could move the dollar and the bond market by shifting expectations on interest rates. This would likely lead to a volatile reaction in the gold market.

One reason why gold prices could be capped even if the CPI data is deemed bullish is that central banks around the world are becoming increasingly more hawkish. Wednesday’s Reserve Bank of New Zealand monetary policy decision, for example, could indicate the central bank is considering a rate hike before the end of the year.

If there is no reaction to the CPI data then this would indicate that traders have already moved on to the testimony of Fed Chair Powell on Wednesday and Thursday. If Powell doesn’t move the gold market then this would mean traders are willing to hold prices in a range until the Fed meets later in the month, or until the release of the U.S. jobs report in early August.