Gold Price Slumps as Traders Take Profits Before US Inflation Data
Gold prices are experiencing renewed selling pressure, reaching $4,300 as the US inflation week begins. This decline follows last Friday's seven-week high of $4,372 and a 7% gain in the previous week.
The current weakness can be attributed to profit-taking by traders after the strong rally last week, as well as repositioning ahead of this week's critical US Consumer Price Index (CPI) data release.
The recent uptrend was strengthened following the US Nonfarm Payrolls report, which showed an unexpected loss of 23,000 jobs in July. This led to a decrease in Federal Reserve (Fed) interest rate hike bets from about 55% pre-data to 44%, according to the CME Group's FedWatch Tool.
TD Securities notes that the US curve 'bull steepened on the negative headline print despite a drop in the Unemployment Rate to 4.1%.' The firm adds that while they expect the Fed to keep rates on hold for 2026 and 2027, September pricing could remain substantial as the Fed continues to monitor data.
Gold's pullback is also linked to a broad-based US Dollar rebound amid renewed tensions surrounding the reopening of the Strait of Hormuz over the weekend. Iranian Foreign Minister Seyyed Abbas Araghchi stated that Tehran was close to reaching an agreement with Oman on a new mechanism for managing maritime traffic through the Strait, but emphasized that it would not be reopened until Washington meets additional conditions.