Gold price rises ahead of US CPI data and first Harris/Trump presidential debate

• The price of gold rises as US Treasury yields fall and the US dollar weakens.
• Traders await US CPI data; Odds of a Fed rate cut are 67% for a 25bps cut and 33% for a 50bps cut.
• Focus is turning to the first US presidential debate, which could affect market sentiment ahead of the election.

Gold prices rose in the mid-North American session on Tuesday, gaining about 0.30% as traders prepared for the crucial August inflation report from the United States (US). That, along with the first presidential debate between Vice President Kamala Harris and former President Donald Trump, could sway financial markets. XAU/USD is trading at $2,514, returning to the daily lows of $2,500.

Market sentiment improved slightly, while the greenback pared some of its earlier gains, a tailwind for the gold metal. US Treasury yields fell ahead of the latest consumer price index (CPI) reading. The numbers are expected to vindicate the Federal Reserve’s (Fed) dovish stance on the start of a rate-cutting cycle, amid fears that the labor market could weaken.

The latest US jobs report showed the economy added fewer people to the labor force than expected, but the unemployment rate fell, a relief for Fed policymakers.

Meanwhile, the swaps market sees the odds of a 50 bps cut rising to 33 percent, compared to 67 percent for 25 bps, according to CME’s FedWatch tool. Earlier, a Reuters poll showed 92 out of 101 economists expect the Federal Reserve (Fed) to cut interest rates by 25 basis points (bps) at its September 17-18 meeting.

Political developments should begin to gain attention ahead of the November 5 US presidential election. Vice President Kamala Harris and Donald Trump will meet for their first debate on Tuesday at 9:00 PM ET (01:00 GMT) on ABC.

Daily Market Moves: Gold price rises as traders track US CPI

• Gold prices rise on Tuesday as the greenback erases earlier gains. The US dollar index (DXY), which tracks the greenback’s performance against six currencies, is basically unchanged at 101.62.
• The 10-year US note yield fell five basis points to 3.648%, reflecting traders’ positioning ahead of September 18-19.
• August US CPI is expected to fall from 2.9% to 2.6% on the year, while core CPI is expected to remain at 3.2%.
• Last week’s NFP report revealed the economy added more than 142,000 workers to the labor force, but missed the consensus of 160,000. However, the drop in the unemployment rate provided a lifeline for the Greenback.
• Last Friday, Fed officials were dovish. New York Fed President John Williams said cutting rates would help keep the labor market balanced, while Governor Christopher Waller said “the time has come” to ease policy.
• Chicago Fed President Austan Goolsbee was dovish, saying policymakers had an “overwhelming” consensus to lower borrowing costs.
• It’s worth noting that Fed officials entered the lockout period ahead of the Federal Open Market Committee’s (FOMC) monetary policy meeting.
• Data from the Chicago Board of Trade (CBOT) indicates that the Fed will cut by at least 108 basis points (bps) this year based on the December 2024 federal funds rate futures contract.

Technical Outlook: Gold price holds gains above $2,500

Technically, XAU/USD is steadily rising but unable to break the all-time high of $2,531 as traders prepare for a critical data release on Wednesday. Momentum shows that gold should trade sideways, based on the Relative Strength Index (RSI), which is almost flat.

If gold clears the ATH, the next resistance would be the $2,550 mark. With obstacles, the next stop would be the psychological figure of $2,600.

Conversely, if the gold price breaks below $2,500, the next support would be the August 22 low at $2,470. On further weakness, the next area of ​​demand would be the confluence of the May 20 high, which turned into support, and the 50-day simple moving average (SMA) between $2,450 and $2,440.