As the core inflation rate declines to 4.7%, the price of gold recovers.

The pullback of the U.S. dollar is giving valuable support to precious metals, as traders speculate on a Federal Reserve that is expected to adopt a less aggressive stance.

Key Insights

• In July, the Core Inflation Rate decreased from 4.8% to 4.7%, while the overall Inflation Rate increased from 3% to 3.2%.
• Traders focusing on the U.S. dollar's pullback caused gold to make an effort to reach a level above $1930.
• After the release of the inflation reports, silver did not experience any noticeable upward momentum.

On August 10th, the United States released its inflation reports for July. These reports revealed that the Inflation Rate increased from 3% in June to 3.2% in July, slightly below the analyst consensus of 3.3%. On the other hand, the Core Inflation Rate, which excludes volatile food and energy prices, declined from 4.8% to 4.7%, contradicting analysts' expectations of it remaining unchanged at 4.7%.

The market has shown more interest in the Core Inflation Rate data as it indicates the impact of the Federal Reserve's rate hikes on prices. The unexpected decline in the Core Inflation Rate suggests that the Fed's actions have exerted significant downward pressure on prices.

Following the release of the inflation reports, the U.S. Dollar Index dropped below the 102.00 level as traders anticipated a more dovish stance from the Federal Reserve. Treasury yields also moved lower, albeit not strongly.

The decline in yields and the weaker U.S. dollar acted as crucial support for the gold market. Currently, gold is attempting to surpass the $1930 level. The recent rebound of the U.S. dollar from its July lows has created pressure on gold prices, making any potential pullback of the American currency a significant positive catalyst for gold.

In contrast, silver briefly tried to rise above the $23.00 level but lacked momentum and retraced towards the $22.70 level. The rising gold/silver ratio continues to exert pressure on silver prices.