Gold jumps over 2% as US CPI eases expectations of rate hikes

Gold rose more than 2% on Tuesday following June CPI data that came in softer than expected, trimming market bets on a July Federal Reserve rate hike and boosting the safe‑haven appeal of bullion【3】.

Inflation data and market reaction

June’s consumer price index rose 3.5% year‑on‑year, easing from 4.2% in May, while the core CPI held steady month‑over‑month at 0.0% after a 0.2% gain in May【3】. Analysts had forecast a 3.8% YoY headline and a 0.2% month‑over‑month core rise, so the headline drop and unchanged core both came in softer than consensus. The surprise lowered the market‑implied probability of a quarter‑point Fed hike in July from roughly 50% to a level traders deem “sharply” reduced, according to metals trader Tai Wong【3】.

The softer inflation print prompted spot gold to climb 1.2% to $4,046.64 per ounce, while U.S. gold futures rose 1.6% to $4,069.70. The broader dollar index fell 0.3%, making gold cheaper for holders of other currencies and reinforcing the rally【3】.

Policy backdrop and prior moves

The gold rally follows a week in which bullion had already posted a gain of more than 2% after earlier soft US jobs data and lower energy prices eased expectations of further Fed tightening【1】. That weekly advance was the first since May, snapping a four‑week losing streak. Swap traders were pricing only a 25% chance of a July hike before the CPI release, down from earlier higher odds【1】.

Federal Reserve Chair Kevin Warsh, who took office in May, has avoided forward guidance, but recent remarks at an ECB forum highlighted “inflation risks have come down,” supporting the view that tighter policy may be delayed【1】. The combination of softer CPI and the Fed chair’s dovish tone has reduced the immediate pressure on non‑yielding assets like gold.

What to watch

• July 28‑29 Fed meeting: Market will gauge whether the Fed still signals a rate hike despite the soft CPI.
• Next CPI release (August): A rebound in headline or core inflation could revive rate‑hike expectations and test gold’s momentum.
• U.S. dollar index levels: A sustained dip below the current 0.3% decline could further buoy gold, while a rebound may cap upside.

The gold surge underscores how quickly inflation surprises can reshape expectations for monetary policy, keeping bullion in focus as investors balance growth concerns with the allure of a safe‑haven asset.