Gold falls again to near $4,020 despite positive US inflation data… Bitcoin maintains its gains

Gold prices retreated on Wednesday after failing to hold onto the strong gains made following the release of US inflation data, as concerns resurfaced about rising oil prices and their potential impact on the inflation trajectory and monetary policy in the United States. Spot gold fell to trade near $4,020 an ounce , after surging more than 2% on Tuesday to around $4,100 , before giving up most of those gains due to profit-taking and renewed selling pressure. The upward surge also encountered technical resistance near $4,102 , the upper limit of a descending price channel, which intensified selling and revived the downward trend.

Gold’s initial gains came after the release of the US Consumer Price Index (CPI) data for June, which showed inflation slowing more than expected.

The price index fell by 0.4% on a monthly basis , while the annual inflation rate dropped to 3.5%, compared to market expectations of 3.8% .

This data reinforced investors’ bets that the Federal Reserve might move to ease the pace of monetary policy tightening, which initially supported gold.

However, this optimism did not last long, as oil prices began to rise again, raising fears of renewed inflationary pressures in the coming months, which could prompt the Federal Reserve to keep interest rates high for a longer period.

High interest rates are one of the most significant negative factors for gold, given that the precious metal does not generate a return, which reduces its appeal compared to yield-bearing assets such as bonds.

In contrast, Federal Reserve officials confirmed that the latest inflation data represents a positive development, but stressed the need to see several more months of declining inflation before making a decision to change monetary policy, with markets awaiting the release of the Producer Price Index (PPI) as the next benchmark for assessing price pressures.

While gold lost momentum, Bitcoin continued its strong performance, settling near $65,000 and gaining almost 5% . It also managed to return to trading above its 50-day moving average, a technical indicator many traders consider a positive sign of improving momentum. Inflation data also led to a decline in market expectations for an interest rate hike at the Federal Reserve meeting in July, with the probability of a rate increase, according to market pricing, dropping to around 17% compared to 42% before the data release.

Despite this decline, markets still expect at least one more interest rate hike before the end of the year , with the September meeting remaining at the forefront of investors’ concerns.

Analysts believe that gold will remain hostage to the balance between slowing inflation on one hand, and continued pressures resulting from rising energy prices on the other, while Bitcoin continues to benefit from declining expectations of monetary tightening and the continued appetite of investors for high-risk assets.