Gold shines under Sun before U.S inflation data

Gold rose above $3,240 in the London trading session on Tuesday. A stronger US dollar, higher US yields, and optimism regarding the US-China trade agreement have kept the precious metal on the defensive. Gold traders are anticipating Tuesday’s US CPI inflation data, which could provide clues about the direction of US Fed policy. Today’s release of new inflation data will provide a current perspective on pricing trends. The data holds importance as it will encompass one of the initial sets of “concrete” economic figures, reflecting, to some extent, the timeframe following President Trump’s imposition of considerable tariffs on trading allies. If the data indicates increased pressure, it will strengthen the argument that the financial burdens of a high-tariff policy shouldered by American consumers diminish their purchasing capacity. Additionally, producer prices can provide insight into inflation before these costs are passed on to consumers, thereby offering a forecast of price direction. Market action demonstrates that the bullion asset remains above the critical 100-day Exponential Moving Average, suggesting that the daily timeframe reflects a continued positive outlook. The psychological level of $3,200 acts as the initial support level for XAU/USD in a bearish scenario. The April 2 high of $3,142 represents where the additional downside filter appears. Swap markets have priced in the Fed’s initial 25 basis point (bps) rate cut for the September meeting and anticipate two more rate cuts by the end of the year. They indicated last week that there would be three cuts this year, and change could occur as early as July. Gold was negatively influenced by improved risk sentiment after the United States and China announced a temporary agreement to lower tariffs. Chinese duties on US imports will be reduced from 125 percent to 10 percent, and the US will lower additional tariffs imposed on Chinese imports in April of this year from 145 percent to 30 percent. The new policies will be in effect for ninety days.