Gold Faces Crucial CPI Test After Breakout

Gold's price surged by almost 7.5% last week, breaking out of its tight range around $4,000 and regaining attention in the market.

The catalyst for this move was weak US payrolls data, which delivered another negative signal for the dollar and boosted expectations for a more dovish Federal Reserve.

However, the next major test for gold comes on Wednesday with the release of July's US Consumer Price Index (CPI) figures. A softer-than-expected print would strengthen the argument for a more dovish Fed and could push gold higher.

Economists expect headline CPI to rise 0.1% month-on-month, taking the annual rate to 3.4%, while core inflation is forecast to increase 0.2%, leaving annual core at 2.5%.