Gold looks ahead to Michigan Sentiment and inflation expectations

NEW YORK (July 18) Gold (XAU/USD) is trading higher on Friday as investors remain focused on Fed expectations and look ahead to key US economic data. At the time of writing, XAU/USD recovers above $3,350, pushing the price closer toward the upper boundary of a symmetrical triangle pattern.

Traders are digesting fresh US housing data released on Friday, with Building Permits and Housing Starts for June providing further insight into the health of the real estate sector which improved significantly.

The preliminary reading of the University of Michigan (UoM) sentiment data and inflation expectations is scheduled for release at 14:00 GMT. This monthly report is based on how consumers perceive the current economic environment in the US and their potential expectations for the next 12 months. As it is considered to be a leading economic indicator, it often sets expectations, sentiment, and the potential outlook for the economy. 

As the Federal Reserve (Fed) continues to hold interest rates within the current 4.25%-4.50% range, investors continue to search for fresh clues on when the Fed may reduce rates. According to the CME FedWatch Tool, markets are pricing in a 57.8% probability of a 25 basis point (bps) rate cut in September, with the likelihood of the Fed keeping rates unchanged at the same meeting at 39.5%.

Daily digest markets movers: Gold hinges on macro data and Fed rhetoric 

• US Building Permits rose 1.39 million in June, beating estimates of 1.394 million and reflecting a 0.2% increase after falling 2% in May. Meanhwil Housing Starts also surprised to the upside, reporting a 1.321 million expansion, up from 1.263 million. A increase of 4.6% shows a very different picture from the 9.7% contraction last month.
• The preliminary UoM Consumer Sentiment Index is expected to tick up to 61.5 in July, compared to 60.7 recorded in the previous month. The report also provides information on the 1-year and 5-year consumer inflation expectations, which recorded 5% and 4%, respectively, in June.
• On Thursday, Fed Governor Adriana Kugler pushed back on expectations for near-term monetary policy easing, stating that there should be “no rate cut for some time” as “tariffs begin passing through to consumer prices.” Her comments reflected a hawkish stance centered on persistent inflation pressures.  
• In contrast, San Francisco Fed President Mary Daly struck a more balanced tone, saying it’s “reasonable to expect two rate cuts by the end of 2025,” while warning that “overly restrictive policy could unduly hurt the labor market” if the Fed waits too long. 
• Fed Governor Christopher Waller adopted a more dovish view, stating, “It makes sense to cut the FOMC’s policy rate by 25 basis points at the July meeting,” citing risks from slowing growth and labor market softness.
• The US Consumer Price Index (CPI) on Wednesday reflected that inflation is showing signs of rising, reinforcing the view that the Fed may delay rate cuts beyond September, possibly pushing easing to October. 

FXStreet