Gold prices edged lower during European trading on Tuesday as investors weighed subdued inflation data, a strengthening dollar, and renewed trade war threats. Despite the U.S. Consumer Price Index (CPI) showing modest gains, market focus remained fixed on tariffs and upcoming catalysts like the Producer Price Index (PPI).
The dollar advanced slightly, buoyed by rising Treasury yields and positioning near technical resistance. The dollar index (DXY) touched 98.324 intraday, approaching its 50-day simple moving average of 98.80. A decisive close above this level could signal further momentum toward the June 23 high of 99.421. With support near 97.899, the greenback's persistent strength continued to pressure gold upward.
The Federal Reserve finds itself caught between conflicting forces: Tuesday's CPI report reinforced expectations it will hold rates steady this month. Headline CPI rose 0.3% month-over-month, lifting the annual rate to 2.7%, while core CPI increased 0.2% monthly, aligning with the 2.9% yearly forecast. FedWatch tools indicate just a 2.6% probability of a July rate cut, though markets still price in 50 basis points of easing by year-end.
Adding to the complexity, the Trump administration confirmed reviewing presidential authority to remove Fed Chair Jerome Powell. While immediate action seems unlikely, the threat itself injects policy uncertainty that could sway market sentiment and future rate expectations.
Trade tensions bolstered gold's safe-haven appeal as former President Trump renewed threats of imposing tariffs up to 30% on EU and Mexican imports. Though gold struggled to break higher, these threats provided underlying support. Persistent geopolitical and trade friction continues to offer a price floor, particularly with no resolution in sight. Historically, such risks have reinforced gold's role as a defensive asset during economic stress.
Gold prices remain confined within their well-established range since mid-May. "Gold should be more animated... We need fresh catalysts to propel it back above $3400," noted independent trader Tai Wong. Until then, gold remains constrained by dollar strength and rate speculation. Analysts like Peter Grant of Zaner Metals maintain a bullish stance, citing enduring uncertainty and the eventual easing outlook.
With CPI failing to trigger a breakout, attention shifts to Wednesday's PPI release and fresh Fed commentary. Should the dollar breach 98.80 and rate-cut expectations diminish further, gold could face added downward pressure. Conversely, any dovish surprises or escalated trade rhetoric could reignite upside potential.
Outlook: Neutral to Bullish. Gold continues to draw support from trade tensions and Fed easing prospects, though robust dollar performance and uncertainty over the timing of rate cuts may cap near-term gains. Breaking recent highs likely requires new catalysts.
Spot gold traded at $3328.24 per ounce as of 23:38 Beijing time, down 0.45%.
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