Meanwhile, investors will be watching US consumer price figures on Wednesday for further insight into inflation and clues about the path of the Federal Reserve’s monetary policy. Overall, expectations for a Fed rate cut in September remain unchanged, although market opinion is now divided on whether the cut will be 50 basis points or a more modest 25 basis points. As is well known, low interest rates enhance the appeal of non-interest-bearing precious metals such as gold.

Start Trading Now With The World's Best Trading Platform!

As for the factors affecting the gold market the US Dollar Index (DXY) fell towards 103 on Tuesday, approaching a five-month low of 102.9 touched last week as renewed hopes for weaker inflation in line with recent growth concerns boosted bets on a rate cut by the Federal Reserve. According to the economic calendar, US producer prices rose 0.1% month-on-month in July, missing expectations for a 0.2% increase, while core producer prices unexpectedly held back from rising during the period. The data raised hopes for a decline in consumer prices reflected in today’s CPI and incoming PCE readings, which are in line with the necessary conditions set by the Federal Open Market Committee for a rate cut by the US Federal Reserve. Financial markets are currently expecting the Fed to deliver 100 basis points of rate cuts during the remaining three policy decisions this year. Meanwhile, downbeat eurozone economic data from the ZEW and doubts over further rate cuts by the Bank of Japan have tempered the dollar index’s decline.

Another factor affecting gold market trading, the yield on the US 10-year Treasury note fell below 3.9% on Tuesday, approaching a one-year low of 3.8% on August 2. Obviously, this is fresh evidence of weak inflation supported bets that the Federal Reserve is set to cut interest rates on multiple occasions this year, spurring demand for fixed income assets.

US producer prices rose 0.1% from the previous month in July, missing expectations for a faster 0.2% increase, while the core index unexpectedly held off from increasing. This preceded today’s release of the headline CPI, which is set to show that consumer prices slowed further in the period, in line with the necessary backdrop for the Fed to cut interest rates after subdued manufacturing growth according to the ISM Purchasing Managers’ Index. Thus, the market showed a loose consensus that the US central bank is set to deliver 100 basis points in interest rate cuts among its remaining three decisions this year.

However, weak demand in the past 10-year and 30-year bond auctions, as well as the high supply of corporate bonds, limited the decline in yields.

Gold Price Forecast and Analysis Today:

As we mentioned before, and I confirm now that the bullish trend in gold price will remain the strongest and may continue for some time as long as global geopolitical tensions are increasing along with the easing tone of global central banks. Technically, we still prefer to buy gold from every downward level. Gold price will be affected by the reaction to the announcement of US inflation figures, which will have a strong and direct impact on the future of the US central bank policy. Currently, the closest support levels for gold are $2452, $2440 and $2420 respectively.

More By This Author: