Gold prices rose nearly 1% on Wednesday as U.S. inflation data showed signs of cooling, boosting investor expectations that the Federal Reserve may resume easing in September. The XAU/USD traded around $3,363.
May’s Consumer Price Index (CPI) in the U.S. came in lower than April, giving gold buyers an opportunity to push prices toward a daily peak near $3,360 before some gains were trimmed.
Ongoing uncertainty in U.S.-China trade talks is likely to keep gold prices elevated. While U.S. Commerce Secretary Howard Lutnick said a framework to implement the Geneva Consensus has been reached, it still awaits approval from Presidents Donald Trump and Xi Jinping. Chinese Vice Commerce Minister Li Chenggang described the talks as rational and candid, and expressed optimism that the framework could build trust between the two countries.
Market attention now shifts to upcoming Producer Price Index (PPI) and jobs data. Recent ISM Purchasing Managers Index (PMI) surveys showed rising input costs for companies, suggesting inflation pressures persist despite the softer CPI. Analysts note that tariffs’ impact on households may yet unfold.
The U.S. dollar’s weakness supports gold prices, with the Dollar Index (DXY) falling 0.44% to a four-day low of 98.61. U.S. Treasury yields also declined, with the 10-year yield dropping five basis points to 4.42%, and real yields falling to 2.13%, further aiding bullion’s advance.
U.S. inflation rose less than expected in May. Headline CPI increased 2.4% year-over-year, below forecasts of 2.5% but slightly above April’s 2.3%. Core CPI held steady at 2.8%, signaling persistent but stable underlying inflation.
Geopolitical tensions remain elevated as President Trump warned of Iran’s growing aggression in nuclear talks. Iran’s Foreign Minister said a peaceful nuclear agreement is within reach as talks resume Sunday.
Money markets currently price in roughly 47.5 basis points of Fed easing by year-end.
Technically, gold is consolidating below $3,400, showing hesitation among buyers to push higher. The Relative Strength Index (RSI) remains neutral, indicating a lack of clear trend. For bullish momentum to continue, gold must break above $3,350 to challenge $3,400, with further resistance near $3,450 and the all-time high of $3,500. A drop below $3,300 would expose support levels around the 50-day moving average near $3,269 and the April 3 support at $3,167.
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