Gold prices fell on Thursday as investors digested the latest US inflation data, which showed that prices rose at a faster pace than expected in June. The Consumer Price Index (CPI) rose 8.6% year-over-year, the highest level since December 1981. The core CPI, which excludes food and energy prices, rose 6.0% year-over-year.
The higher inflation data reinforced expectations that the Federal Reserve will continue to raise interest rates aggressively in an effort to cool the economy. This is bad news for gold, which is considered a safe-haven asset and tends to do well when interest rates are low.
Gold traders will now be looking to the US Producer Price Index (PPI) data, which is due to be released on Friday. The PPI is a measure of the prices paid by businesses for inputs, such as raw materials and labor. If the PPI comes in higher than expected, it could further pressure gold prices.
The gold market is also facing headwinds from the strength of the US dollar. The dollar has been rising in recent months as investors seek safety in the currency amid global economic uncertainty. A strong dollar makes gold more expensive for buyers who hold other currencies.
Looking ahead, gold prices are likely to remain under pressure as long as inflation remains high and the Federal Reserve continues to raise interest rates. However, if the economy weakens significantly, gold could start to recover as investors seek safe-haven assets.
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