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Gold rises near 3-week high as dollar retreats

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Gold prices regained their positive momentum as the US dollar slightly retreated from its multi week high, amid persistent uncertainty surrounding global trade. This renewed the appeal of the precious metal as a safe haven. However, diminishing expectations of interest rate cuts by the Federal Reserve may limit gold’s gains in the lead up to the release of the June US Consumer Price Index (CPI) report.

In this context, new threats by US President Donald Trump to impose 100% tariffs on Russia should President Vladimir Putin fail to reach an agreement to end the invasion of Ukraine within 50 days have heightened market anticipation, according to Bloomberg. At the same time, Trump renewed his criticism of Federal Reserve Chairman Jerome Powell, stating that interest rates should be at 1% or lower, rather than the current range of 4.25% to 4.50%.

These remarks prompted gold traders to take profits after the yellow metal touched a three week high at $3,375, as markets await the upcoming US inflation data. Currently, the market is pricing in a 50 basis point rate cut by the Federal Reserve by the end of the year, with the first reduction expected as early as September.

However, these expectations remain highly dependent on the upcoming CPI data. Economists forecast that the annual headline and core inflation rates will rise by 2.7% and 3%, respectively, in June reflecting the potential impact of tariffs on prices. On a monthly basis, both readings are expected to increase by 0.3%.

Any inflation reading that exceeds expectations may support the Fed’s case for keeping interest rates unchanged for a longer period, potentially boosting the US dollar at the expense of non yielding gold. Conversely, if inflation data comes in lower than anticipated, markets may renew bets on two rate cuts this year, giving gold prices a fresh boost.

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