Gold is steadily climbing towards the key threshold of $1,800 an ounce as investors look ahead to the US inflation data due out later today.
Expectation is mounting that the July CPI figure will come in lower than June, pointing to inflation having peaked in the US, and giving the Federal Reserve more leeway in how aggressive future interest rates need to be as the central bank seeks to bring inflation back down to 2%.
The prospect of fewer and less aggressive rate hikes going forward has been the driver behind gold’s recent gains so a CPI figure that comes in at market expectations of 5.9% or lower may be the nudge needed to see gold climb back above $1,800 an ounce.
However, if this figure disappoints and suggests that inflation is yet to peak then the sell-off could be significant with no clear support for gold until it reaches the July low at just under $1,700 an ounce.
For so long, inflation has been the dominant theme of the market agenda and today is no different. The only change is that optimism is mounting that for the US at least, the worst ravages of ever-faster rising prices may be over.
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