Gold prices retreated from a daily high of $2,529 as US inflation data increased the likelihood of a 25 basis points Fed rate cut. The rising US Treasury yields and a stronger US Dollar weighed on the non-yielding metal, with the 10-year T-note climbing to 3.655%. The CME FedWatch Tool showed a 71% chance of a 25 bps cut, leading to a 0.18% drop in the XAU/USD pair to $2,511.
The sentiment remained positive after the US Bureau of Labor Statistics’ CPI data for August was released, showing unchanged headline inflation and a slight increase in core inflation. Market participants increased US Treasury yields amid fears that the Fed might opt for a 25 basis points rate cut instead of 50 bps next week. The US Dollar Index (DXY) hit a daily high of 101.82, strengthening after the news, while the chances of a 50 bps rate cut decreased to 29%.
Investors trimmed their odds for a 50 bps Fed rate cut, with the focus shifting towards a 25 bps cut. The technical outlook for gold prices suggested a consolidation around $2,500 to $2,531, with resistance levels at $2,550 and $2,600, and support at $2,470 and $2,440. Overall, the uncertainty surrounding the Fed’s rate cut decision continues to impact gold prices in the market.
