Shaky Rate-Cut Hopes Push Gold to $3323; Technicals Point to $3400

Gold prices pared some of their gains on diminishing rate cut hopes.  It hit a low of $3323 yesterday and is currently trading around $3345.78.

Readings for July were conflicting. Headline CPI increased 0.2% month over month (down from 0.3% in June), thereby keeping annual inflation at 2.7% versus predictions of 2.8%. Driven mostly by housing costs while food prices stayed flat, Core CPI—which excludes food and energy—climbed 0.3% monthly and 3.1% annually (its highest six-month rise). Headline PPI on the producer side surged 0.9% month over month, the biggest single-month rise since June 2022, which raised annual PPI to 3.3%, far beyond the Fed's 2% target. Core PPI likewise jumped 0.6%, with services (especially tariff-impacted regions and machinery) making 75% of the increase and significant input-cost gains in vegetables (+38.9%) and diesel (+11.8%).

These numbers make the Fed's road toward its predicted September rate cut more difficult. The softer headline CPI favors a 25 bp cut; market odds are still high at 94.5%; however, the unexpected PPI surge causes worries that higher wholesale prices could filter through to customers, therefore moderating future disinflation. Therefore, emphasizing data dependency, the Fed is confronted with a "delicate balancing act." Future CPI releases, retail sales statistics, and earnings reports in August will be essential in deciding not just the degree (25 bp vs. 50 bp) but also the timing of any rate cut. Investors are already turning into inflation-resistant industries; as bond and stock markets might exhibit increased volatility, consumers might sense steady price pressures in food and energy.

According to the CME Fed Watch tool, the chances of a 25 bpbs rate cut in Sep 17th, 202,5 meeting have decreased to 82.80% from 88.90% a week ago.

Technical Analysis: Key Levels and Trading Strategy
 
Gold prices are holding above the short-term moving average 34 EMA and  55 EMA and above the long-term moving averages (200 EMA) on the 4-hour chart. Immediate support is at $3320, and a break below this level will drag the yellow metal to $3300/$3290/$3275/$3245/$3200. The near-term resistance is at $3355 with potential price targets at $3374/$3385/$3400/$3420/$3450/$3475/$3500/$3550.

 It is good to buy on dips around $3330 with a stop-loss at $3300 for a target price of $3400.