Gold Rallies Ahead of CPI as Rate Hike Expectations Plummet
Gold prices surged to $4,414.63 an ounce on Wednesday before the release of July's Consumer Price Index (CPI) data, showing that investors were reducing their expectations for another Federal Reserve interest-rate increase in September.
The initial move was driven less by the CPI report itself than by fading expectations for a rate hike, with market pricing for a September Fed hike falling to around 40% after the inflation release from about 46% beforehand.
The dollar initially weakened and Treasury yields moved lower, adding support for bullion. The reaction helps explain why gold remained above $4,400 after the data, as investors were reducing the probability that policymakers would need to tighten again in September.
July's CPI report showed headline consumer prices increased 0.1% in July and 3.4% from a year earlier, matching consensus forecasts. Annual inflation slowed from 3.5% in June, with core CPI rising 2.5% year over year, also matching expectations.