Gold prices traded in a tight range on Thursday, remaining above $2,600 and rebounding from a three-week low as traders anticipate the release of key U.S. Consumer Price Index (CPI) data.
The metal's recent decline coincides with growing market expectations regarding the US Federal Reserve’s potential monetary policy decisions.
Investors are closely watching the U.S. CPI inflation data, as its outcome could significantly influence the Federal Reserve’s next interest rate decision.
According to the CME Group's FedWatch Tool, there is currently an 84.8% chance that the Fed will implement a 25 basis point (bps) rate cut in November.
The release of the Fed's September meeting minutes, which signaled a dovish outlook, reinforced this belief, despite stronger-than-expected nonfarm payrolls data last week.
The minutes revealed that a substantial majority of Fed officials supported a 50 bps rate cut, balancing inflation concerns with labour market risks.
The annual CPI is expected to rise by 2.3% in September, down from 2.5% in August, while core CPI is forecast to hold steady at 3.2%.
Monthly CPI inflation is projected to ease to 0.1%, with the core figure also expected to dip slightly to 0.2%.
Should inflation data fall below expectations, market participants may anticipate a larger Fed rate cut, potentially weakening the U.S. dollar and giving gold prices a lift.
Conversely, stronger-than-expected inflation data could prompt the Fed to hold off on a rate cut, strengthening the U.S. dollar and placing downward pressure on gold.
Gold prices have also received support from recent economic stimulus measures in China.
On Wednesday, China's Finance Ministry unveiled a CNY 2 trillion fiscal stimulus package aimed at bolstering growth.
Additionally, the People's Bank of China (PBOC) introduced a CNY 500 billion liquidity facility to support domestic markets.
