Gold futures on Wednesday morning traded modestly higher, setting the stage for the first back-to-back advance for the commodity in about a month, as investors awaited a reading on U.S. inflation that could serve as a catalyst for financial markets.
December gold GCZ21, 1.13% GC00, 1.14% was trading $6.40, or 0.4%, higher at $1,738 an ounce, following a 0.3% gain on Tuesday. A finish in positive territory on Wednesday would mark gold’s first consecutive period of gains since a three-session run ended July 15, FactSet data show.
Investors are watching for the U.S. July consumer price index because it could help to influence the Federal Reserve monetary-policy plans and guide the path forward for raising interest rates and ending the central bank’s monthly asset purchases of $120 billion in Treasurys and mortgage backed securities, a program known as quantitative easing.
Economists surveyed by The Wall Street Journal expect the Labor Department to report the consumer-price index, or CPI, rose 5.3% in July from a year earlier, compared with a 5.4% annual rate in June. Fed officials have persistently said that they see inflation readings in the recovery from COVID-19 as temporary, but a number of policy makers have begun to outline a plan to end accommodative policies and eventually lift interest rates which would ripple through financial markets and impact gold trading.
“If CPI comes in around the expected figure, this would likely keep the stock market bulls happy, and the dollar firmer,” wrote Fawad Razaqzada, market analyst at ThinkMarkets, in a research note.
“However, if CPI comes in much weaker, then the markets will probably break sharply higher to new highs on Wall Street as tapering expectations will be pushed back,” the analyst wrote. “This scenario is also badly needed for gold and silver longs, and the dollar shorts.”
Meanwhile, silver for September delivery SIU21, 0.40% was trading 2 cents, or less than 0.1%, higher at $23.41 an ounce, following a 0.5% Tuesday gain.