Gold prices continue to move within a certain range prior to the upcoming inflation test.
The Federal Reserve is expected to start cutting interest rates imminently, according to the CME Group's FedWatch Tool. The tool indicates an 86.5 percent chance of a quarter-point rate cut next month, reflecting the market's anticipation that the Fed will begin lowering rates after holding steady through July.
This strong market expectation for interest rate cuts starting in September 2025 is based on recent economic indicators. The current outlook shows a high probability of multiple rate cuts, with the tool pricing in a 54.3 percent probability of three rate cuts by the end of 2025.
The Fed's target rate range in mid-August 2025 is 4.25%–4.50%, following a gradual rate decrease from prior peaks. The FedWatch Tool, which leverages 30-Day Fed Funds futures prices, offers a real-time gauge of market expectations for Fed policy.
The recent labor market data, including significant downward revisions to jobs reports and a weaker July payroll print, have increased expectations for multiple rate cuts. Economic resilience earlier in 2025, such as strong personal consumption data, initially supported expectations for a more cautious or gradual cutting cycle. However, the recent labor data revisions have shifted sentiment decidedly toward rate reductions.
In other news, President Trump downplayed expectations for the upcoming meeting in Alaska, stating it would be a "feel-out meeting." Trump also named EJ Antoni, the chief economist of the conservative Heritage Foundation, as the next Commissioner of the Bureau of Labour Statistics (BLS) by President Trump. Antoni is known for his reputation as a "highly respected" economist, and Trump pledged that under his leadership, the BLS's figures would remain "honest and accurate."
Meanwhile, gold prices moved in a narrow range on Tuesday, with spot gold edging up by 0.2 percent to $3,348.94 per ounce, and U.S. gold futures down 0.2 percent at $3,397.20. The Trump administration announced it would not impose tariffs on gold imports.
The U.S. Labour Department is expected to release a report on U.S. consumer price inflation later in the day. The annual rate of growth for core consumer price inflation is seen at 3.0 percent, and the annual rate of price growth is expected to inch up to 2.8 percent in July. The current rate of core consumer price inflation is expected to increase by 0.3 percent.
[1] Source: CME Group's FedWatch Tool [2] Source: Reuters [3] Source: Federal Reserve [4] Source: CME Group [5] Source: Bloomberg
