Gold staged a dramatic rally-and-reversal session on Tuesday. Spot gold broke above the $4,400.00 per troy ounce threshold intraday, touching $4,434.80, hitting a two-month high since June 5. Nevertheless, weighed down by multiple headwinds including technical resistance, profit-taking and hawkish Federal Reserve rhetoric, gold prices tumbled sharply afterwards, flipping from gains to losses and closing at $4,368.07, down 0.5%. Gold regained upward momentum on Wednesday ahead of the release of critical U.S. inflation data, while oil prices rose first then pulled back. The weaker-than-expected U.S. July nonfarm payrolls report released last week served as the catalyst for the latest gold rebound. Disappointing employment figures prompted the market to rapidly repricing Fed rate hike odds, with the probability of a September rate hike sliding to 48.1%. During European trading hours, spot gold climbed to $4,423.72 per troy ounce. As of press time, it edged back slightly to around $4,417.55, with market sentiment turning cautious.

Austan Goolsbee, President of the Federal Reserve Bank of Chicago, stated in a video released on Tuesday that he was personally more concerned about elevated inflation than a soft labor market. It remains uncertain whether this concern will translate into his endorsement for the rate hikes advocated by several officials at the last FOMC meeting. Goolsbee does not hold a voting seat on the FOMC this year and did not clarify whether he supported keeping interest rates unchanged amid inflation running above the Fed’s 2% target for more than five consecutive years, even though most policymakers still project inflation will resume its downward trajectory later this year. Unlike former Fed chairs, Fed Chair Walsh has consistently refrained from sending any signals regarding the interest rate path. Goolsbee also expressed similar skepticism over forward guidance on monetary policy. In the video, he offered no specific suggestions on appropriate monetary policy but answered a series of questions about the Federal Reserve and the economy, including whether artificial intelligence would disrupt the labor market.

The U.S. Department of Labor will publish July CPI data on Wednesday. Market consensus forecasts headline CPI to rise 0.1% month-on-month and 3.4% year-on-year, with core CPI up 0.2% month-on-month and 2.5% year-on-year. This print is regarded as the next anchor for market pricing of a September Fed rate hike. Although the July CPI reading will not reflect the recent uptick in energy prices, it will play a pivotal role in shaping expectations for the Fed’s September policy meeting. Money markets currently price roughly 50/50 odds of a rate increase. If core month-on-month CPI lands around 0.2%, rate hike bets may be pushed back further to December, and gold could hold above the $4,400.00 level in the short run. An upside surprise in CPI, by contrast, would trigger a repricing for September tightening and potentially spark a technical correction in bullion.

Short-term Gold Market Outlook: Immediate upside resistance for spot gold sits at $4,495.00 per troy ounce, with key downside support located at $4,225.00.

Spot Gold Daily Chart

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