Gold Records Modest Gains Ahead of Huge July CPI Report; DXY Slides

Gold futures firmed above $1,800 on Tuesday, the highest level in six weeks. Gold prices have been surging over the last two weeks, despite a tightening Federal Reserve and potential signs that inflation could be easing. Will the yellow metal hit $1,825 this week?

December gold futures added $6.50, or 0.36%, to $1,811.70 per ounce at 18:16 GMT on Tuesday on the COMEX division of the New York Mercantile Exchange. The yellow metal is up nearly 5% over the last month, paring its year-to-date loss to around 1%.

Silver, the sister commodity to gold, could not hold onto its gains. October silver futures tumbled $0.129, or 0.63%, to $20.485 an ounce. The white metal has rallied close to 8% this month, although it is still down about 12% on the year.

Investors are waiting for the much-anticipated July consumer price index (CPI) data. The market is forecasting that the annual inflation rate will dip to 8.7%, down from 9.1% in June. The core inflation rate, which eliminates the volatile food and energy sectors, is expected to climb to 6.1% year-over-year.

The biggest reason for the likely drop in price inflation is because of cratering crude oil and gasoline prices. US crude prices have erased its post-invasion gains, while gasoline is hovering close to $4 a gallon.

Meanwhile, last week’s sizzling July jobs report could force the Federal Reserve to rethink its ultra-aggressive tightening efforts. This would allow gold to benefit from falling interest rates, which makes yield-bearing assets less attractive.

“Gold is getting a boost today from both safe-haven flows as stocks weaken and the dollar softens,” wrote Edward Moya, senior market analyst at Oanda, in a client note. “If inflation eases a little more than expected, gold could make a run towards the $1850 region.”

The US Treasury Market was mostly up across the board on Tuesday, with the benchmark 10-year yield up 3.6 basis points to 2.799. The one-year bill added 1.6 basis points to 3.29%, while the 30-year bond picked up one basis point to 3.008%. Also, the spread between the two- and ten-year yield widened to -50 basis points.

Falling yields are bullish for gold because it diminishes the opportunity cost of holding non-yielding bullion.

The US Dollar Index (DXY), which gauges the greenback against a basket of currencies, declined 0.14% to 106.29, from an opening of 106.44. The index is trading flat on the week, but it is still up nearly 11% year-to-date.

A weaker buck is good for commodities priced in dollars because it makes it cheaper for foreign investors to purchase.

In other metal markets, October copper futures were flat at $3.5825 per pound. October platinum futures slipped $7.30, or 0.78%, to $931.10 an ounce. October palladium futures shed $15.00, or 0.67%, to $2,226.50 an ounce.

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