Quick overview

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The bullion asset faced intraday selling near the $3,375 level and is struggling to build on its modest gains to reach a three-day high.

 

Optimism about a three-month extension of the US-China trade truce and the US-Russia summit on Friday, aimed at ending the war in Ukraine, continues to act as a strong indicator of global risk.

Bullish traders are supported by several factors, which also suggest that some dip-buying might occur.

The US dollar’s (USD) selling bias remains unchanged despite increasing expectations that the US Federal Reserve (Fed) will cut interest rates in September.

Traders have also priced in the possibility of two rate cuts by the Fed by year’s end, which should continue to support non-yielding gold. It’s prudent to wait for further confirmation of this trend through follow-through sales.

According to the July Consumer Price Index (CPI), core inflation, which excludes food and energy, increased by 0.3 percent month-over-month and 3.1 percent year-over-year.

In contrast, headline inflation rose by 0.2 percent month-over-month and 2 percent year-over-year. Tariffs have had a minimal impact thus far; food prices have remained stable, while energy prices declined by 1.1 percent.

The data also shows that most additional expenses are currently being absorbed by businesses, preventing a direct transfer of costs to consumers.

Furthermore, these factors have placed pressure on the dollar and, coupled with signs of a slowing labor market, have raised the likelihood of a 25-basis point rate cut in September to over 95 percent, according to the CME FedWatch tool. This situation has contributed to an increase in gold prices.

Last week, markets were shaken by fears of potential duties on 1-kg bars that would have impacted Switzerland, one of the largest gold exporters.

However, President Donald Trump confirmed that no tariffs will be imposed on gold bullion. While the White House acknowledged that an executive order is being prepared to address misinformation regarding gold tariffs, the Swiss Precious Metals Producers Association praised the decision but called for an official decree to ensure stability.