Gold (XAU/USD) trades on the back foot on Wednesday as the US Dollar (USD) and US Treasury yields rebound after coming under pressure on Tuesday following softer-than-expected US Consumer Price Index (CPI) data.
At the time of writing, XAU/USD trades around $4,036, down 0.40% on the day
US inflation cooled sharply in June, although much of the decline was driven by lower energy prices following last month’s interim peace deal between the United States (US) and Iran. Headline CPI fell 0.4% MoM after a 0.5% rise in May, slowing the annual rate to 3.5% from 4.2%. Core CPI month-on-month came in flat at 0% after a previous 0.2% gain, while the annual core rate eased to 2.6% in June from 2.9%.
The data reduced expectations of an immediate Federal Reserve (Fed) interest rate hike and briefly lifted Gold above $4,100 on Tuesday. Still, it did not materially change the Fed’s hawkish outlook, as inflation risks persist with Oil prices creeping higher again following renewed fighting in the Middle East. In an interview with Fox News on Tuesday, US President Donald Trump warned that military strikes against Iran would intensify unless Tehran resumed negotiations. “Next week comes the bridges.