Joseph Dahrieh

Gold prices advanced on Wednesday as investors continued to expect more monetary easing this year after the release of US inflation data. July’s headline CPI increased 2.7% year-on-year, undershooting consensus estimates, while the core reading edged up to 3.1%. The data prompted markets to reinforce expectations for a September rate cut of 25 basis points. Lower interest rate prospects could enhance the appeal of non-yielding assets such as gold.

In the meantime, geopolitical tensions continue to underpin safe-haven demand and could provide some support. However, the asset could come under pressure as investors monitor the development around talks between the US and Russia during this week’s meeting. Any progress toward a peace agreement could weigh on the gold market as risk aversion recedes.

Looking ahead, markets will watch US PPI, jobless claims, and retail sales releases for further clues on the Fed’s policy path. Softer-than-anticipated readings could continue to favor expectations of monetary policy easing and support gold prices.

Dahrieh is Managing Principal at Tickmill