Will Key U.S Inflation Data Send Gold Prices Higher Or Lower?

Precious Metal Prices Steady Ahead of Key U.S. Inflation Data Amid Fed’s Hawkish Stance

Precious metal prices are currently holding steady in wait-and-see mode as traders turn their attention to this week’s highly anticipated U.S Inflation figures for clues on the markets next big move.

Last month, the Federal Reserve surprised the markets by announcing that they expect to cut interest rates just once this year – taking a hawkish stance on inflation by holding borrowing costs at a 23-year high for the seventh meeting in a row.

The Fed’s median dot-plot projections showed policymakers forecast making only one quarter-point cut this year – which is a significant change from the Federal Open Market Committee’s last “dot plot” in March, when officials signalled three cuts in 2024.

Incoming Inflation Data Key for the Federal Reserve

The big question now is: Will the Fed’s projections hold true or could upcoming data convince policy makers back into three cuts this year?

The answer to this question may come from the eagerly awaited U.S Consumer Price and Producer Price Inflation figures, due for release this week.

Fed officials have said repeatedly that they need to see clear evidence inflation is under control before the central bank will cut its benchmark interest rate. According to GSC Commodity Intelligence – a decline in U.S inflation is expected this week, which could bolster the case for multiple Federal Reserve interest rate cuts this year.

In a note to clients, analysts at GSC Commodity Intelligence wrote that “Consumer Price Inflation is expected to slow to 3.1% in June, down from 3.3% in May – marking a third consecutive monthly deceleration. This alongside Friday’s Non-Farm Payrolls data showing that the pace of hiring in the U.S is slowing, could ultimately encourage the Fed to deliver its first rate cut sooner rather than later”.

Expected Rate Cuts

At present traders are pricing in at least two rate cuts this year, with the first arriving in September or November, but a third consecutive monthly drop in inflation could potentially prompt the Fed to cut rates as soon as August.

Elsewhere this week, traders will be closely monitoring the outcome of Federal Reserve Chair Jerome Powell’s two-day testimony before Congress – which may shed more light into the timing of the Fed’s first interest-rate cut.

Extraordinary times create extraordinary opportunities and right now, these markets are a trader’s paradise. Each and every one of these macro events is guaranteed to be a license to print money, which traders will not want to miss out on!