Gold prices have remained “range bound” this week following the Fed meeting and positive US economic data, reflecting a struggle among traders to determine a definitive market direction.
The yellow metal is on track to finish the week at about US$2,334 per ounce, a gain of about 1.3% over the past week. While it's a strong finish, it is a far cry from the $2,400 level reached in mid-May.
"Despite the major data and event risk this week, gold prices have remained range-bound with traders struggling to establish a clear directional signal on the back of the week’s events,” TickMill’s James Harte highlighted.
Both the Consumer Price Index (CPI) and the Producer Price Index (PPI) showed declines last month. CPI decreased for the second consecutive month to 3.3% from the previous 3.4%. Meanwhile, PPI fell sharply to -0.2% from the prior 0.5%, which was below the expected 0.1%, representing its largest monthly drop since October 2023.
The Federal Reserve's recent stance has added complexity to the market landscape. "Despite broadly dovish data, the Fed struck a more-hawkish-than-expected tone which threw traders something of a curveball,” Harte noted.
Powell's cautionary remarks further influenced sentiment. He emphasized that inflation was still too high and would likely delay the Fed’s easing cycle.
That could be a bull case for gold prices, according to Harte. "Powell’s comments tempered the initial move lower in USD, halting the rally in gold futures for now.
“Gold prices should remain supported given the uptick in easing expectations for September. A cut in Q3 is now priced over 60%, up from around 50% at the start of last week."