Gold Holds $4,400 as Disinflation Narrative Brings $4,600 Into Focus

Gold futures took a measured step back on Thursday after a spirited two-session run that lifted the metal to a ten-week high, but the pullback had more to do with traders booking gains than any shift in the underlying narrative. December gold futures opened at $4,408.20 per troy ounce, flat with Wednesday’s close, then eased lower ahead of the morning’s inflation data. December gold settled at $4395.40, down -1.39%. The tone was one of cautious consolidation, not capitulation.

Wednesday’s catalyst was the July Consumer Price Index, released August 12 by the Bureau of Labor Statistics. Headline CPI rose just 0.1% month-over-month and 3.4% year-over-year, down from 3.5% in June. Core CPI came in at 0.2% for the month and 2.5% annually. The print landed in line with expectations but was soft enough to spark a meaningful repricing of Federal Reserve intentions. Spot gold responded by rallying more than 1%, clearing the 100-day moving average at $4,387 and touching its highest level since early June. Markets entered Thursday carrying roughly a 40% implied probability of a 25-basis-point Fed rate hike in September — down from nearly 50% a day earlier and above 50% the week prior.

Thursday’s Producer Price Index extended the disinflationary signal in the headline while introducing enough nuance to keep the September debate alive. Final-demand producer prices were flat at 0.0% for July, below the 0.2% consensus and following June’s 0.3% decline. Annual headline PPI slowed to 4.7%, under both the 4.9% forecast and June’s 5.5% pace. Core PPI rose just 0.2% on the month — again below estimates. Gold saw little immediate reaction to the 8:30 release. The complication is the so-called “super core” measure, PPI excluding food, energy, and trade services, which advanced a firm 0.4% on the month and held at 4.7% annualized. That stickiness in underlying service-side costs is the one number keeping gold from pushing cleanly through resistance that houses the 200-day moving average, and it is the reason Fed Chair Kevin Warsh’s policy posture has not materially softened despite back-to-back encouraging prints. 

On the macro perimeter, the U.S. Dollar Index (DXY) remains near 99.9, roughly flat on the week and holding just above its post-payrolls low near 99.5 — notably stubborn given two consecutive soft inflation readings. Two-year Treasury yields have slipped toward 4.17%, consistent with fading rate-hike bets, but the long end of the curve is telling a different story. Weak demand at this week’s 10-year auction pushed the stop-out yield to 4.683%, a reminder that fiscal concerns have not been resolved. The CME FedWatch Tool shows the odds of the Fed holding the benchmark rate in its current 3.50–3.75% band at approximately 53.9%. That spread between short-end repricing and long-end stickiness amounts to a steepening curve — historically a favorable environment for gold, though not a clean one.

Geopolitics continues to provide a floor beneath gold. U.S.-Iran negotiations have stalled, the Strait of Hormuz remains operationally uncertain, and Houthi forces reported fresh attacks on shipping as recently as Tuesday. Oil, however, is currently moving in gold’s favor: Brent crude fell to $87.69 and WTI to $81.97 Thursday after OPEC and the International Energy Agency both downgraded their demand outlooks. Softer energy prices are broadly disinflationary and reinforce the case for the Fed to hold, which keeps the dollar in check. Structural buying adds further ballast — China’s People’s Bank has now extended its gold purchases through a record 21 consecutive months, ETF inflows have been positive for five straight sessions, and on a month-over-month basis, gold has gained nearly 10%.

Technically, the structure remains bullish. The 100-day moving average is still acting as current support. Even with a decline today, gold futures have challenged this technical indicator for the last three days and it appears as though the 100-day is destined to flip form resistance into support. The next test to the upside is the 200-day simple moving average. 

The immediate catalyst queue runs from University of Michigan sentiment data Friday, through FOMC minutes on August 19 — which will reveal the full weight of the July meeting’s three dissenting votes in favor of an immediate hike — and on to PCE on August 26. The macro picture is in genuine flux. Gold is trading exactly as one would expect: elevated, range-bound, and coiled for its next directional move. Watch $4,400 to the downside and $4,500 to the upside.

Wishing you as always, good trading,