July CPI data shows inflation easing to 3.5% YoY, reducing pressure on the Federal Reserve to tighten further in September.
Gold prices surged over 1% to trade above $4,400 as US inflation data met expectations, easing concerns over further Federal Reserve rate hikes. The XAU/USD pair rebounded from daily lows of $4,362 after July’s Consumer Price Index (CPI) fell to 3.5% year-over-year from 3.6% in June.
Core CPI also declined to 2.5% from 2.6%, reinforcing expectations that the Fed may pause its tightening cycle. Money markets now assign a 60% probability the Fed will hold rates steady in September, up from 52% before the data. December odds for a hike remain at 73%, pending three more inflation reports.
The rally reflects investor relief as cooling inflation reduces immediate policy risks, though geopolitical tensions and energy price volatility could disrupt the disinflation trend.