Gold prices firmed in Asian trading on Wednesday, holding comfortably above the US$3,300 level as investors positioned ahead of a key United States inflation report that could shift expectations for Federal Reserve policy.
By 3:10 pm AEST (5:10 am GMT), spot gold was up US$19.66, or 0.6%, trading at US$3,342.60 per ounce.
The precious metal has remained well-supported in recent sessions, with investors balancing the impact of easing trade tensions between the United States and China against the uncertainty surrounding the U.S. inflation outlook.
On Tuesday, both nations reached a framework agreement in London aimed at resolving longstanding trade frictions, a move that lent modest support to risk sentiment and marginally boosted the U.S. dollar.
However, attention has now turned squarely to the U.S. consumer price index (CPI) figures due later on Wednesday. The data is widely seen as pivotal in shaping the outlook for interest rates, particularly the likelihood of a rate cut at the Federal Reserve’s September meeting.
According to the CME FedWatch Tool, markets currently assign a 52% probability to a 25 basis point rate cut in September.
A stronger-than-expected CPI result, especially if monthly inflation exceeds the forecast 0.2% headline and 0.3% core increases, could diminish these expectations and strengthen the U.S. dollar, placing downward pressure on gold.
Conversely, if inflation surprises to the downside, investors may become more confident in the possibility of two rate cuts by the end of the year, a scenario that would likely benefit the non-yielding gold price.
The May inflation print is also being closely watched for early signs of pass-through effects from President Trump’s recent tariff measures, which analysts expect may begin to filter into consumer prices.
