Gold slipped on Wednesday as a firmer dollar followed mixed US inflation and growth data that left the Federal Reserve's rate path unclear. Traders now lean toward a September hold, while gold takes a breather after last week's debasement-trade rally and an upcoming Jackson Hole speech from Fed Chair Kevin Warsh keeps the outlook in flux.
Gold dropped 1.4% to $4,594.36/oz at 16:00 ET on Wednesday, while gold futures shed 1% to $4,648.26/oz. A stronger dollar drove the pullback after July inflation data came in mixed.
Fed hold odds firm after PCE, GDP data
Core PCE, the Fed's preferred inflation gauge, rose 0.2% month-over-month and 3.3% year-over-year in July, matching expectations and holding well above the central bank's 2% target. Headline PCE increased 0.2% M/M and 3.7% Y/Y, just above forecasts.
Separately, the second estimate of Q2 real GDP growth held at 1.5%, matching consensus. Durable goods orders for July climbed 1.1%, beating the expected 0.4% rise. As a result, the CME FedWatch tool showed the odds of the Fed holding rates steady in September rising to nearly 64% from about 60% a day earlier.
Gold takes a breather after last week's debasement-trade surge
The data lands amid volatility in the bond market. Rising inflation jitters tied to elevated oil prices and mounting debt from mega-cap companies funding AI infrastructure spending triggered a steep sell-off in longer-dated Treasuries last week. A Treasury intervention aimed at capping yields had little effect after news that US debt had crossed $40 trillion.
That fiscal skepticism pushed investors toward hard assets such as gold and cryptocurrency instead of fiat currencies, a pattern known as the debasement trade. Gold prices surged last week and crypto rallied, while the dollar index shed nearly 1%.
Attention now turns to Fed Chair Kevin Warsh's keynote at the Jackson Hole conference on Friday for further rate signals.
Geopolitical tensions add another layer
Gold traders also watched Russia-Ukraine developments after Bloomberg News reported that Russia was preparing to escalate attacks on Ukraine, citing three people close to the Kremlin, after concluding that peace negotiations had stalled. Separately, Al Jazeera reported that Iran and Oman had agreed on a new temporary route through the Strait of Hormuz following talks in Tehran, though the waterway would not fully reopen until prior ceasefire commitments were met.
Source: Investing.com
Trading involves risk.
Risk Disclaimer
