Gold (XAU) Daily Forecast: Price Hits $2,424; Correction Ahead or More Upside?

Federal Reserve Rate Cut Expectations and Easing Inflation Boost Gold as Dollar Weakens

The US dollar continued its downward trend as Consumer Price Index (CPI) data showed easing inflation in June. Excluding volatile items like food and energy, the core CPI also dipped, increasing expectations that the Federal Reserve could cut interest rates in 2024. The CME FedWatch Tool now indicates an 85% probability of a quarter-point rate cut in September, up from 70%.

Robust labor market data, marked by fewer Americans filing for unemployment benefits, suggests ongoing economic strength amid declining inflation, presenting a balanced economic outlook.

June’s US CPI unexpectedly fell by 0.1% month-over-month, missing the anticipated 0.1% increase. Core CPI, excluding food and energy, also dipped from 0.2% in May to 0.1% in June, aligning with forecasts. Annually, headline inflation decreased to 3% from 3.3%, while core inflation dropped to 3.3%, below expectations and down from 3.4%.

In contrast, initial jobless claims for the week ending July 6 were 222,000, lower than the consensus of 236,000 and the previous week’s 239,000, indicating continued labor market strength.

Easing inflation and the increased likelihood of Fed rate cuts bolstered gold prices. Lower interest rates tend to weaken the US dollar and make gold more attractive as an inflation hedge and alternative investment.