Gold prices edged higher on Wednesday but remained below yesterday’s peak.
The metal benefited from more stable Treasury yields and dollar, although a return to the upside could create headwinds. Geopolitical uncertainty in the Middle East remains a source of risk as renewed tensions could push oil prices higher, raising inflation concerns and bond yields.
Today’s US Consumer Price Index reading for July remains at the center of attention and could significantly affect monetary policy expectations. Interest rate bets currently point to a 50/50 between a hold and a hike.
The data release could fuel volatility in gold in case of a surprise. A softer read could tilt expectations toward a hold and could pull bond yields down, supporting gold. Conversely, stronger inflation could weigh on the metal, capping its recent rebound.
Developments in the Middle East could also affect gold’s direction as any significant rise in oil prices could fuel monetary policy tightening expectations. However, gold continues to see strong long-term support from constant central bank purchases. China’s central bank added roughly 20 tonnes to its reserves in July, the largest monthly addition since October 2023.
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