Gold Is on Solid Footing After Tame Inflation Print

Gold (CM:XAUUSD) rallied by 2.2% this week as the combination of dovish comments from Fed Chair Jerome Powell and a soft CPI print bolstered hopes of a rate cut in September. Lower rates make gold more attractive for investors as the yellow metal bears no interest.

The Perfect Backdrop for Gold

Overall, gold has jumped by around 16.8% so far this year. Its less expensive cousin, silver (CM:XAGUSD), is also up by a massive 31.1% during this period. Yesterday’s CPI print once again pushed gold prices to the crucial $2,400 level. Gold has been seesawing in the $2,300-$2,400 zone since April.

The current macroeconomic and geopolitical backdrop seems like the perfect cocktail for gold to finally push past the $2,400 mark. While lower rates and a weak U.S. dollar promise to make gold buying more attractive, the ensuing boost to economic activity and consumer sentiment could act as another catalyst for gold.

Moreover, rising political uncertainty and global geopolitical tensions will continue to keep safe-haven demand for gold buoyant. The U.S. elections later this year and continued tensions in the Middle East and Ukraine are likely to keep gold on top of investors’ minds as we progress into H2 2024. Another promising sign for gold is inflows into global gold ETFs. According to the World Gold Council (WGC), global gold ETFs clocked consecutive inflows during May and June.

But Volatility Cannot Be Ruled Out

Despite this promising setup, any northward move in gold is likely to be accompanied by volatility as investors will have to digest a slew of macroeconomic data readings and central bank views between now and September.

What Is the Outlook for Gold?

Meanwhile, the TipRanks Technical Analysis tool is flashing a Strong Buy signal for gold on a daily timeframe. This means traders could consider using any price dips to go long on gold.

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