With the release of US inflation data for June, expectations of a Federal Reserve rate cut are steadily increasing among investors. They are closely monitoring the upcoming policy changes and their potential impact on the market.

CPI Data Cools Down: Slower Inflation

June's US CPI data revealed a year-on-year core CPI of 3.3%, below market expectations, further confirming a slowdown in inflation. The overall CPI, influenced by lower gasoline prices, fell to a 3% year-on-year increase. These figures have heightened expectations of a Fed rate cut. Traders anticipate the Fed might initiate its first cut in September, with the possibility of three cuts by year-end.

Gold Market Reaction: Steady Price Increase

Gold surges past $2,400 as softer US CPI data fuels expectations of Fed rate cuts in 2024. Last Friday's release of the Producer Price Index further confirms that inflation has resumed its downward trend. The market currently assesses the probability of a rate cut in September to be as high as 94%.

Labor Market: Weakening Labor Demand

Despite slowing inflation, signs of cooling are evident in the labor market. Initial jobless claims decreased last week, but seasonal restructurings in the automotive sector caused significant fluctuations in the data. Overall, with economic activity cooling, the labor market is gradually losing momentum.

Fed's Stance: Dovish Remarks

Fed Chair Powell, testifying before Congress, indicated that policy decisions would be data-dependent, not ruling out the possibility of rate cuts. Analysts suggest the Fed needs to act promptly to prevent economic distress. With consumer prices below expectations, the rationale for a Fed rate cut becomes increasingly compelling.

Market Outlook: Continued Benefits for Gold

Technical analysis shows gold prices maintaining an upward trend after breaking through the 60-day moving average resistance. Sustaining the key support level of $2400 suggests a bullish outlook ahead. Investors should watch support levels around $2402 and $2395, with resistances at $2415 and $2423.

Rate Cut Expectations Boost Gold

The rising expectation of a Federal Reserve interest rate cut has led to a steady increase in gold prices. Both inflation data and the performance of the labor market support the likelihood of a Fed rate cut in September. For investors, the bullish outlook in the gold market remains robust.

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