Rising U.S. Inflation Puts the Fed in a Tight Spot… Gold Recovers from Losses
Gold prices held steady in mid-day trading on Tuesday following the release of U.S. inflation data.
In both local and global markets, gold erased the losses it had recorded earlier in the day, with 21-karat gold trading at EGP 4,580 per gram, while the global ounce stood at $3,350.
The price of 24-karat gold reached EGP 5,229, 18-karat gold was at EGP 3,921, and a gold pound coin was priced at EGP 36,600.
On Monday, the precious metal had fallen by about EGP 40, with the global ounce declining by roughly $46 from $3,397 to $3,351 before partially recovering on the back of the inflation reading.
Gold prices recovered from their lows to trade in nearly neutral territory as consumer price pressures continued to entrench themselves within the broader U.S. economy.
According to data from the U.S. Bureau of Labor Statistics released on Tuesday, the Consumer Price Index (CPI) rose 0.2% in July after a 0.3% increase in June, in line with market expectations.
Annual headline inflation increased 2.7%, slightly below forecasts of 2.8%. Core inflation—which excludes food and energy—rose 0.3% in July, matching June's pace, and climbed 3.1% annually, slightly above expectations of 3.0%.
Some economists view the annual core inflation increase as an early sign that higher prices are becoming embedded in the economy, potentially pressuring consumption. The report noted broad gains in categories including healthcare, airline fares, recreation, household furnishings, and used cars and trucks.
Rising shelter costs—up 0.2% last month—were the largest contributor to headline inflation. On a positive note, energy prices fell 1.1% in July, driven by a 2.2% drop in gasoline prices, leaving the energy index down 1.6% over the past year. Meanwhile, food prices rose 2.9% year-on-year.
Spot gold saw some positive momentum in its initial reaction to the inflation data, last trading at $3,344.10 per ounce, little changed on the day. While higher inflation is typically seen as negative for gold because it may prompt the Federal Reserve to maintain restrictive monetary policy, markets still widely expect a rate cut in September, as weak labor market data continues to outweigh concerns over higher prices.
Analysts note that the combination of high inflation and lower interest rates reduces real yields, lowering the opportunity cost of holding non-yielding assets like gold.
Gold had seen a slight drop at the start of the day on hopes for peace talks between Russia and Ukraine, as well as President Trump's announcement that gold imports would be exempt from tariffs, easing concerns about Swiss gold bars, which account for a significant share of U.S. gold imports.
Trump made the announcement on his Truth Social platform, writing: 'Gold will not be tariffed,' at a time when markets were awaiting an official clarification from the White House following reports of a 39% tariff on one-kilogram gold bars.
Those reports had pushed gold futures to record highs on Friday amid fears of the impact on Switzerland—the world's largest gold refining hub—which exported about $36 billion worth of gold to the U.S. in the first quarter of the year, more than two-thirds of its trade surplus with Washington.
The 39% tariffs affected all Swiss imports to the U.S., including luxury watches, chocolate, and cheese, but Trump's latest remarks eased concerns over bullion exports.
The Swiss Association of Precious Metals Producers and Traders welcomed the statement but stressed the need for a formal, binding decision. Its president, Christoph Wild, said: 'President Trump's statement is an encouraging signal for trade stability, but only a formal decision will provide the certainty the sector and its partners require.'
A White House official told Reuters that the administration is preparing an executive order 'clarifying misinformation' regarding tariffs on gold bars and other products.
The U.S. Customs and Border Protection had stirred controversy last week when it announced that one-kilogram and 100-ounce gold bars would not be exempt from tariffs, prompting financiers and metals companies to seek urgent clarification and resulting in shipments being held in bonded warehouses.
Gold, sold in the U.S. even in major retailers such as Costco, is often used as a hedge against inflation. A one-kilogram bar is priced at around £89,000, while a one-ounce gold coin sells for about £2,500.
On the trade front, Trump signed an order extending the U.S.-China tariff truce by another 90 days, moving the next review date to November 9. This eased pressure on global supply chains in the short term but was seen by traders as a temporary pause rather than significant progress toward resolving the trade dispute.
Despite ongoing inflationary pressures, markets still price in strong odds of a September rate cut, though expectations for a 25-basis-point reduction have eased to around 84% from 90% a week ago, according to the CME FedWatch Tool, reflecting caution ahead of further inflation data.
Markets now await comments from Fed officials Thomas Barkin and Jeffrey Schmid for fresh policy signals, along with upcoming economic data including Thursday's Producer Price Index (PPI), and Friday's Retail Sales and preliminary August Michigan Consumer Sentiment Index—releases that could play a decisive role in shaping expectations for next month's rate decision.
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