Spot gold rallies above $2,470 per ounce

The gold market is rallying after the latest data shows U.S. producers saw an easing in price pressures last month.

Gold prices are rising as U.S. PPI improves in July

The Producer Price Index (PPI) increased by 0.1% in July, following a 0.2% rise in June, according to the U.S. Labor Department. This latest inflation data matched economists’ expectations, who had forecasted a 0.1% gain.

Over the past year, headline wholesale inflation climbed 2.2%, falling short of the 2.6% consensus forecast and lower than June’s 2.7% figure.

The Core PPI, which excludes food and energy costs, remained unchanged at 0.0% in July, surpassing economists’ predictions of a 0.2% increase and down from June’s revised 0.3% rise. On an annual basis, core PPI was 2.4%, significantly below the 3.0% expected and June’s 3.0% reading.

Gold prices are rising following the better-than-expected inflation data. Spot gold rose sharply in the moments following the PPI release, last trading at $2,469.16 for a loss of 0.12% on the day.
PPI is viewed as a leading inflation indicator as producers pass higher input costs on to their customers.

Market analysts have said that falling producer prices, combined with improving CPI inflation, could give the Federal Reserve the confidence to begin lowering interest rates in September, which would support gold’s long-term uptrend.

Gold looks poised to set new record high

Gold prices held steady on Tuesday, remaining near the all-time high reached in July, as the dollar and Treasury yields dipped following U.S. producer price data that bolstered expectations for a Federal Reserve interest rate cut in September.

By 1:54 p.m. ET (1754 GMT), spot gold had declined by 0.2% to $2,467.80 per ounce amid some profit-taking. Gold reached a peak of $2,483.60 on July 17 and has risen 20% this year.

On Monday, Israeli forces continued their operations near the southern Gaza city of Khan Younis, even as international efforts intensified to broker a ceasefire and avert a broader regional conflict involving Iran and its allies.

In a separate development, Ukrainian forces launched a surprise attack last Tuesday, breaching the Russian border and advancing into western parts of Russia's Kursk region. This unexpected move exposed significant vulnerabilities in the Russian border defenses in that area. In the wake of Russia’s invasion, gold's historic and long-term correlation with U.S. Treasury yields broke down as the yellow metal “morphed into a truer geopolitical hedge

Investors will be paying close attention to U.S. producer price data on Tuesday and consumer price figures on Wednesday for additional insights into inflation trends.

On Saturday, Fed Governor Michelle Bowman moderated her typically hawkish stance, acknowledging some recent "welcome" improvements in inflation over the past couple of months.
Currently, markets estimate a 49% probability of the Federal Reserve implementing a 50 basis point rate cut in September, according to the CME Group’s FedWatch tool.

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