Gold Holds Recent Rally as Fed Rate-Hike Odds Fade

Happy Friday, traders. Welcome to our weekly market wrap, where we take a look back at these last five trading days with a focus on the market news, economic data, and headlines that had the most impact on gold prices and other key correlated assets—and may continue to in the future.

So, what kind of week has it been?

Here’s what you need to know:

1. Gold held on to most of its recent rally this week, trading largely between $4,325 and $4,425/oz as buyers continued to defend the rebound.

2. July CPI data helped ease immediate concerns about another Federal Reserve rate hike, supporting gold as headline inflation held at 3.4% year over year and core CPI eased to 2.5%.

3. Thursday’s PPI report delivered a mixed inflation signal: headline producer prices were flat, while the measure excluding food, energy, and trade services rose 0.4% month over month. Gold gave back part of its midweek advance even as September rate-hike odds continued to fade.

4. Next week brings July import and export prices on Tuesday, the minutes from the Fed’s July meeting on Wednesday, and fresh jobless claims and regional manufacturing data on Thursday, while Middle East developments remain an important source of headline risk.

So, What Kind of a Week Has It Been?

The gold market has seen some choppy trading over the last five sessions but, critically, has held on to a majority of the recent rally, trading in a band between $4,325 and $4,425/oz. With a relatively quiet macroeconomic calendar through the remainder of August as we close out the usual summer doldrums, the market’s consensus expectations for the next steps in monetary policy are painting a slightly brighter near- to medium-term glide path for gold. Meanwhile, the looming risk of another sudden shift in the geopolitical conflict centered around the Strait of Hormuz has done little to fade.

Inflation Data Keeps the Rate-Hike Debate in Focus

Some of the most volatile trading we saw this week in gold and other major assets centered on new U.S. inflation data released on Wednesday and Thursday. Wednesday morning’s CPI print came in as expected, with headline consumer inflation at an annualized 3.4% last month while the less volatile core CPI reading was 2.5% year over year. In both cases, that represented a step down of 0.1 percentage point from the prior annual readings.

The data signaled to investors and economists that, for the time being—admittedly a very tenuous qualifier—the U.S. and global economies may avoid a further acceleration in price pressures resulting from the U.S.-Iran war and the higher energy prices it could create. That corresponds with other recent indications that the Fed does not need to rush into raising interest rates again, or that the U.S. economy may struggle with the restrictive impact that higher rates would create. Unsurprisingly, gold saw a healthy rally on Wednesday…