Gold edges higher ahead of US CPI inflation

NEW YORK (June 11) Gold (XAU/USD) is trading higher during the European session on Wednesday as investors adopt a cautious stance ahead of key US inflation data. The precious metal gains modest ground, hovering above $3,330 at the time of writing.  

Market participants are closely watching the upcoming May US Consumer Price Index (CPI) release on Wednesday, which is expected to provide critical insight into inflation dynamics and Federal Reserve (Fed) monetary policy.

Consensus forecasts suggest that US headline inflation accelerated to an annual rate of 2.5% in May, up from the 2.3% increase seen in April. During the same period, core CPI inflation, which excludes the volatile food and energy prices, is expected to tick up to 2.9% from 2.8%.

Rising inflation and the prospect of higher interest rates by the Fed typically support the US Dollar (USD), weighing on non-yielding assets like Gold.

Gold daily digest market movers: XAU/USD driven by US-China trade deal and US CPI data 

• The US and China reach a trade deal that includes the removal of China’s export restrictions on rare earths, which is likely to offer some relief for the US supply chain. These minerals are crucial for sectors such as technology, defense and green energy, where they are essential for products like semiconductors, electric vehicles (EVs) and military hardware.
• High-level negotiations between the two countries in London resulted in a provisional framework agreement, which now awaits a formal signature from US President Donald Trump and Chinese President Xi Jinping. 
• On the other hand,  Trump received a favorable development on Tuesday after a federal appeals court ruled that his “Liberation Day” tariffs can remain in effect, for now. The decision temporarily overturns a lower court ruling from last month, in which the US Court of International Trade blocked the levies, citing procedural violations in how they were enacted.
• Regarding US inflation data, the CPI and the core CPI are projected to rise by 0.2% and 0.3%, respectively, on a monthly basis.
• On Thursday, the US will release the US Producer Price Index (PPI) data for May, which is expected also to show an increase in headline inflation from a producer level.
• These figures are likely to influence market expectations regarding the Fed policy path. The Fed left the federal funds rate unchanged at the 4.25%–4.50 % range at its May meeting, but policymakers have signaled that their decisions remain data-dependent.
• According to the CME FedWatch Tool, market participants expect the Fed to keep interest rates unchanged at the June and July meetings, with a 52.2% probability of an interest rate cut priced in for September.

FXStreet