Gold price rises as investors focus on inflation and US debate

The price of gold rises as U.S. Treasury yields fall and the U.S. dollar weakens.
Traders await US CPI data; the probability of a Fed rate cut is 67% (by 25 basis points) and 33% (by 50 basis points).
Attention is focused on the first US presidential debate, which could have an impact on market sentiment ahead of the election.

Gold prices rose in the North American session on Tuesday, gaining around 0.30% as investors prepared for the crucial August inflation report from the United States (US). This, along with the first presidential debate between Vice President Kamala Harris and former President Donald Trump, could weigh on financial markets. XAU/USD is trading at $2,514, rebounding from intraday lows of $2,500.

Market sentiment improved slightly, with the Greenback paring some of its earlier gains, which was positive for the gold metal. US Treasury yields fell ahead of the latest Consumer Price Index (CPI) reading. The data is expected to support the Federal Reserve’s (Fed) dovish stance on starting a rate cut cycle amid concerns that the job market could weaken.

The latest US jobs report revealed that the economy added fewer people to the workforce than expected, but the unemployment rate fell slightly, a relief to Fed policymakers.

Meanwhile, the swap market shows that the chances of a 50-basis-point cut have risen to 33%, while they stand at 67% for a 25-basis-point cut, according to the CME FedWatch tool. Earlier, a Reuters poll showed that 92 out of 101 economists expect the Federal Reserve (Fed) to cut interest rates by 25 basis points (bps) at its Sept. 17-18 meeting.

Political events should begin to attract attention ahead of the US presidential election on November 5. Vice President Kamala Harris and Donald Trump will meet for their first debate on Tuesday at 9pm ET (01:00 GMT) via ABC.

Daily Market Movement Review: Gold Price Rises as Traders Turn Their Eyes to US CPI

Gold is rising on Tuesday as the greenback erases earlier gains. The U.S. Dollar Index (DXY), which tracks the greenback against six currencies, is virtually unchanged at 101.62.
The yield on the U.S. 10-year Treasury note fell five basis points to 3.648%, reflecting investor positioning ahead of the events of September 18-19.
The US CPI is expected to decline from 2.9% to 2.6% year-on-year in August, while the core CPI is expected to hold steady at 3.2%.
Last week’s NFP report revealed the economy added more than 142,000 workers to the workforce, but fell low of expectations of 160,000. However, the fall in the unemployment rate gave the greenback a lifeline.
Fed officials were dovish last Friday, with New York Fed President John Williams saying a rate cut would support keep the labor market in balance, while Gov. Christopher Waller said it was “time” to ease policy.
Chicago Federal Reserve President Austan Goolsbee sounded a dovish stance, saying there was “overwhelming” agreement among policymakers on the need to lower borrowing costs.
It is worth noting that Federal Reserve officials have entered a period of blackout ahead of the Federal Open Market Committee (FOMC) monetary policy meeting.
Data from the Chicago Board of Trade (CBOT) indicates the Federal Reserve is likely to cut interest rates by at least 108 basis points (bps) this year, based on federal funds rate futures through December 2024.

Technical Outlook: Gold Price Maintains Gains Above $2,500

Technically, XAU/USD is rising steadily but is unable to break above the all-time high of $2,531 as traders prepare for Wednesday’s critical data release. Momentum shows gold should remain sideways, with the Relative Strength Index (RSI) nearly flat.

If gold breaks ATH, the next resistance will be $2,550. After breaking through this threshold, the next stop will be the psychological $2,600.

Conversely, if gold falls below $2,500, the next support will be the August 22 low at $2,470. On further weakness, the next demand zone will be the confluence of the May 20 high, which became support, and the 50-day straightforward moving average (SMA) between $2,450 and $2,440.