Gold Surges to Two-Month High on Soft Inflation Data

On August 12, gold prices surged to a two-month high after mild U.S. inflation data was released, which served as a direct catalyst for markets to scale back bets on a September rate hike.

The Consumer Price Index (CPI) rose 0.1% month-on-month in July, matching market expectations, while the year-over-year increase eased from 3.5% in June to 3.4%. Excluding food and energy, the core CPI climbed 2.5% year over year, below the previous reading of 2.6%. As a result, traders have lowered their probability of a September rate hike from roughly 46% before the data release to around 40%, according to the CME Group's FedWatch tool.

Edward Meir, a Marex analyst, noted that the CPI data was encouraging and combined with a weaker U.S. dollar and technical factors helped fuel the rally in gold prices. The decisive break above the 100-day moving average provided bulls with solid technical support.