World gold prices surged sharply in the trading session on July 15 after the US announced June inflation data lower than market expectations. This development weakened the USD, while also causing investors to reduce expectations that the US Federal Reserve (Fed) will continue to raise interest rates in upcoming meetings.
As of the beginning of the US trading session, spot gold prices increased by about 1.6%, while gold futures contracts rose to 4,070.3 USD/ounce after rebounding sharply from the lowest level since the beginning of July.
The main driving force comes from the US consumer price index (CPI) report for June. According to published data, CPI increased by 3.5% compared to the same period last year, lower than the 4.2% of May. Meanwhile, core inflation (Core CPI) did not increase compared to the previous month, after increasing by 0.2% in May.
Analysts believe that the diễn biến of core inflation is of particular importance because this is an index that the Fed closely monitors when making monetary policy decisions. The index's sideways movement shows that inflationary pressure is showing signs of cooling down, thereby reducing the need to continue tightening policies.
Immediately after the data was released, the market quickly adjusted expectations about the Fed's interest rate roadmap. Many investors have reduced their positions betting on the possibility of the Fed raising interest rates in the meeting at the end of July, and the prospect of raising interest rates in September is also easing.
Along with that, the USD Index decreased by about 0.6%, making gold more attractive to investors holding other currencies, thereby supporting buying power in the precious metals market.
Technically, the recovery momentum in the session is also considered a positive signal when gold prices quickly reversed after falling to the lowest level since the beginning of July. Recovering the 4,070 USD/ounce zone brings the market closer to the 4,100 – 4,150 USD/ounce resistance zone, which is considered the decisive area for the short-term trend of gold prices in recent weeks.
Investors are now shifting their attention to the Fed policy meeting taking place on July 28-29. After the latest inflation report, the market will continue to monitor Fed officials' statements as well as subsequent economic data to assess whether the cooling trend of inflation is sustainable enough to change the direction of monetary policy.
