Will US inflation data make or break gold’s rally? [Video]

With the Employment Report now in the rear-view mirror, U.S Consumer Price Inflation data is anticipated to be the next big market-moving event that traders will not want to miss.

Over the last 12 months, inflation has spread to every corner of the economy with primary Cost of Living Expenses from Food, Fuel, Housing, Clothing and Energy prices – rising at double-digit annual rates for the first time in over 40 years – further deepening the country's cost-of-living crisis.

A string of recent much hotter-than-expected inflation readings have enviably spurred the Federal Reserve’s efforts to restore price stability, which intensified in June after officials abandoned previously-laid plans to deliver a half-point interest rate hike and instead dropped a bombshell on the markets by raising interest rates by a “super-sized” 75 basis points.

In July, the Federal Reserve raised interest rates by another super-sized 75 basis points for the second month in a row.

The latest rate hike means the central bank is in the throes of the most aggressive cycle of monetary tightening since 1981. It follows a 50 basis point rate hike in May and a 75 basis points rate hike in June – the first of that magnitude since 1994.

There’s no denying that we are in an environment, where the Federal Reserve is faced with a tough choice: high inflation or the risk of recession. Faced with that choice, the Fed’s recent actions clearly signal they have chosen a recession.

After raising interest rates by 200 basis points in the last 60 days, Fed Chairman Jerome Powell signalled that another super-sized hike could be on the cards for September – all, of course, depending on the upcoming inflation data.

With the Federal Reserve taking a data-dependent approach on rate hikes, traders are now carefully watching every economic release for clues on the markets next big move.

Just how aggressively the Fed will raise rates again next month will ultimately be determined by the central bank’s favourite measure of inflation – Consumer Price Index (CPI) data, due for release on Wednesday.

If the reading tops forecasts again for another straight month in a row, that will intensify pressure on the Fed to respond with yet another “super-sized” 75 basis points rate hike or maybe even an “historic” 100 basis point rate hike at their next policy meeting.

Right now, Gold remains a traders' market packed with endless opportunities to capitalize on the short-term macro-driven volatility – And that's the most profitable strategy right now

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