US inflation figures coming in as expected halted the sharp gains that the US dollar has enjoyed since the announcement of strong US jobs numbers for July. This allowed gold to rise to the level of $1755, where it has settled as of this writing. Gold prices posted their biggest one-day percentage gain on Wednesday since May 6. The US dollar usually trends inversely to the performance of gold.
The results of official economic data showed that the Core Consumer Price Index (CPI) in the United States rose less than the expected 0.3% on a monthly basis in July. The data indicated that inflation may have peaked as supply chain disruptions caused by the COVID-19 virus make their way through the economy. However, Fed officials offered differing views on whether the data indicated that the economy was ready to reduce assets and raise interest rates.
In terms of the future of US monetary policy, Kansas City Fed President Esther George said the labor market is expected to extend gains and that the time for the central bank to begin returning toward pre-COVID-19 standards is now. Atlanta Fed President Rafael Bostic said that because the Fed is committed to maximum employment before making any moves, interest rates will not be raised too quickly, and inflationary pressures are likely to be temporary.
In Asia, the People's Bank of China is also increasingly feeling pressure to cut interest rates, as the country's recent COVID-19 outbreak threatens the economic recovery.
All in all, the global economic recovery has increased pressure on bullion this year as investors prepare for super-easy policies in an epidemic era to be reined in. Gold is also tracking the dollar's reversal, with August losses in precious metals reversed amid the dollar's gains.
Gold technical analysis
Despite attempts to rebound upwards for three trading sessions, the bulls still need to test the psychological resistance of $1800 to return to a bullish performance, which in turn increases buying. Currently, the closest resistance levels for gold are $1762, $1775 and $1790. On the other hand, the price of gold may return to its sharp bearish channel again in the event that the price of gold moves to the level of $1720 and below it.
The price of gold will be affected today by the extent risk appetite, along with the strength of the US dollar after the announcement of the PPI reading, one of the tools for measuring US inflation, and the number of weekly jobless claims.
