Gold is challenging levels last seen in late September ahead of the release of the latest batch of US inflation data that is likely to show that the rate at which consumer prices are rising is still yet to peak.
Gold has suffered a dreadful July so far, dropping almost $100 an ounce after falling through the psychologically important threshold of $1,800 an ounce to now be trading around $1,725 an ounce.
Live Gold Price – $/oz
Today’s US inflation data will be a key indicator of whether the Federal Reserve needs to maintain its aggressive monetary policy for a while longer yet. The jobs data out of the US at the end of last week illustrated that the world’s largest economy remains in relatively good condition so a high inflation figure today will further embolden the central bank in further large interest rate hikes not just later this month but in the following months too.
It is this environment of ever-increasing interest rates that has been the catalyst for gold’s spectacular recent fall with the precious metal’s lack of yield reducing its appeal compared to other safe-haven assets such as bonds that are providing greater returns.
Holders of gold will be hoping that the majority of gold’s punishment has already been meted out and with another 75 basis point hike now priced in, its current level represents a low point where it will stabilise from.
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