By Linh Tran, Market Analyst at XS.com
Gold quickly regained its upward momentum after the CPI report, rebounding from the trough around $3,615/oz to near $3,650/oz, reversing the pullback that stemmed from profit-taking and a brief rebound in the USD and yields.
The message from the data is broadly “soft enough” to keep the easing narrative intact: Core CPI rose 0.3% m/m in line with expectations, while headline CPI at 0.4% m/m was slightly above forecast. Earlier, PPI and Core PPI both at -0.1% m/m signaled a clear cooling of producer-level price pressures, and jobless claims of 263K indicated the labor market continues to soften. This combination tempered real yields and the USD after the initial reaction, triggering “buy-the-dip” demand for gold.
The key in the short term is the September 18 FOMC rate decision, which will depend on how the Committee assesses the recent data set.
Given the mixed signals—negative PPI, higher unemployment, and Core CPI remaining on track—the market still leans toward a 25 bps cut, or at least a conditional easing message.
If the Fed confirms this bias and the forward guidance suggests room for further rate cuts, real yields have scope to decline further, reinforcing gold’s high base. Conversely, if the Fed emphasizes inflation risks from the 0.4% m/m headline print and signals caution about the pace of easing, the USD/yields could rebound, pushing gold into a choppy phase before the larger trend is validated.
Beyond monetary policy, secondary variables in the next few sessions—such as UoM inflation expectations, oil price dynamics, and geopolitical headlines (for example, the recent shooting down of UAVs in Polish airspace amid the escalating Russia–Ukraine conflict)—can shift inflation expectations and safe-haven demand, thereby amplifying volatility. From a market standpoint, the backdrop remains supportive for the metal: rate-cut expectations are intact, the USD is less dominant, and hedging demand persists.
In the short term, gold’s trend is tentatively constructive. A scenario in which the Fed confirms an easing cycle (or at least clearly opens the door to easing) after the mid-September meeting would catalyze gold to maintain a high base and extend its recent highs. The main risk lies in the Fed “erring on the side of caution” because of the rise in the headline CPI, causing real yields to turn up again and forcing gold into a short-term correction before fresh buying emerges.