Gold Steady as Data Strengthens, Fed Uncertainty Lingers
Here's what you need to know:
Gold held near $3325/oz despite a mild weekly loss, reacting to positive macroeconomic data.
June CPI showed inflation softening, pressuring gold prices downward early in the week.
Stronger-than-expected Retail Sales data reinforced a healthy economic outlook.
Political pressure on the Fed added volatility to the dollar and influenced gold pricing.
So, What Kind of a Week Has it Been?
So, what kind of week has it been?
Consumer Price Index and Gold's Drop
The mild week-over-week loss that gold spot prices are closing in on comes down, broadly, to a week of solid macro data coming from the US economy: consumer inflation came in marginally lower than expected (in most reads) while later in the week, Retail Sales data for the month of June rebounded well above the consensus projection. The reaction to these reports, for gold, adhered to the yellow metal's historical relationships. Both the reassurance of solid and/or improving economic function pare back the market's need for safe-haven buying; at this economic moment in particular, it also signals less pressure on the Federal Reserve to lower rates sooner, which, if it does happen, will be a boon to gold as a non-yielding asset.
Tuesday's Consumer Price Index reporting, as much as we could place something on the calendar, was always the focal point of this week's macro calendar. As is often the case, there is the survey view of the data (which is where the financial media gravitates to for its' headlines) and there's the deeper, more detailed read of the data set. In terms of the former, despite overall consumer inflation coming in hotter than expected on an YoY basis the numbers generally reported price pressures cooling in-step with the projections (in the case of monthly changes in overall inflation) or even faster (in the case of both monthly and annualized reads of the more closely-tracked "core CPI" number.) As we would've predicted if we'd seen the data in advance, gold prices fell immediately following the CPI print and for the day on Tuesday, as the yellow metal typically weakens when price pressures are seen to be easing and also because, in tandem with US labor market health, the pace of inflation continues to be one of the key numbers used to predict the next move(s) of the "data dependent" FOMC which has yet to introduce the first rate cut of 2025.
Tariff Impacts and Inflation Worries
At the same time, more granular analysis of the June CPI data have lead analysts in the intervening days to argue that we might be seeing nascent stressors on the US economy as a result of the Trump Tariff strategy and that this may be the final "free pass" we get before seeing US consumers more negatively impacted by extreme import duties on goods coming in from America's key trading partners. This impression should temper the downward pressure on gold prices (at least in terms of what comes from analysts of inflation in the system) in the coming weeks. It also implies that there will be even greater focus—and greater potential volatility as a result—on the next month's CPI prints.
Gold Rebounds on Strong Retail Sales
Despite the sliding prices post-CPI, gold has maintained a steady bid of support around the level of $3325/oz, and on Wednesday, the precious metal rebounded. Thursday's Retail Sales data, which came in much better than anticipated (+0.6% MoM vs. +0.1% exp.), reinforced the week's narrative. The economy continues to look (relatively) healthy in the current rate environment, and despite the Trump Tariff roller coaster, reducing uncertainty in the system, and the evidence of US consumers staying out in force, ameliorates the pressure on the Fed to cut rates sooner or faster.
Political Pressure on the Fed
In a less tangible part of market news, we cannot ignore the resumption of the implication (or, at times, out right threats) that the US President may attempt to remove Fed Chair Jerome Powell from his positions in favor of someone more willing to bend the knee, abdicate central bank independence, and cut interest rates to suit the administration's views. This factor, perhaps more than the macro data points of the week, has pushed the most volatility this week into US Dollar markets and, as a result, gold prices. Especially with a lighter data calendar on deck for the week ahead, we will be forced to contend with this as an ongoing story for gold.
In the meantime, traders, I hope you can get out and safely enjoy your weekend for the next couple of days. After that, I'll see you back here next week for another market recap.
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