Good inflation number Tuesday. Gold Price Today spiked over 2%. Then oil moved higher and gold gave most of it back. Bitcoin did not follow gold lower. Two different assets reacting to the same data in different ways.
Gold Price Today Surges After Soft CPI Report
Gold jumped more than 2% to $4,100 after the June CPI report showed annual inflation easing to 3.5%. Below the 3.8% forecast. Meaningful beat to the downside that briefly changed the rate conversation.
Then it slid back. Ended the session near the $4,000 to $4,020 area. Almost all of the gain gone by the close.
Two things brought it back down. First was oil. Prices climbed again during the session as Iran situation remained unresolved. Rising oil after a soft CPI print creates a confusing signal. Inflation looked better in June. Oil moving higher suggests July and August might not look as good.
Second was technical resistance. Gold ran into a ceiling near $4,102 which sits at the top of a descending channel pattern. Lower highs and lower lows forming over recent weeks. Every time gold approaches that level sellers have shown up. Tuesday was no different.
CPI Inflation Report Lowers Fed Rate Hike Expectations
Worth not losing sight of the actual data. Consumer prices fell 0.4% month over month in June. Annual rate came down to 3.5% from 4.2% in May. That is a significant one month improvement.
Fed officials welcomed the reading but said they need several more months of cooling data before declaring victory. Reasonable position. One good month does not change the inflation picture permanently especially with oil prices climbing again and Iran situation still creating supply uncertainty.
July rate hike probability dropped sharply after the number. CME FedWatch Tool showed probability falling from 42% to 17% in one session. September is now the main focus for anyone still expecting a hike this year. That shift in timing is meaningful for markets even if a hike is not completely off the table.
PPI report is next. Producer prices give another angle on where inflation is heading. If that also comes in soft the disinflationary trend gains more credibility. If it surprises higher the CPI relief starts looking more temporary.
Bitcoin Price Holds Gains Above $65,000
Bitcoin price today continued to outperform gold, holding near $65,000 despite higher oil prices and geopolitical uncertainty.
Also crossed back above its 50 day moving average. That is a technical level traders watch closely as a sign of improving momentum. When an asset reclaims its 50 day average after trading below it the signal is generally read as positive.
Why did Bitcoin hold when gold did not. Partly different sensitivities. Gold is more directly tied to real interest rate expectations. When rate cut hopes fade gold loses its appeal quickly because the opportunity cost of holding a zero yield asset goes up. Bitcoin also has no yield but trades more on risk appetite and momentum than on precise rate calculations.
Soft CPI boosting confidence that the Fed is not going to hike aggressively is broadly good for risk assets. Bitcoin as a risk asset benefited. Gold as a rate sensitive asset gave back gains when oil reminded markets that the inflation fight is not over yet.
What Gold and Bitcoin Investors Should Watch Next
CPI came in good. Gold jumped then fell back as oil climbed. Bitcoin rose and held. Fed July hike probability dropped from 42% to 17%. September still live. Fed wants more data before declaring anything.
Oil is the variable that keeps complicating every positive development. Every time inflation data improves oil prices create a new reason to worry about future inflation. Until the Iran situation stabilizes or oil pulls back durably that pattern is likely to repeat.
Gold needs rate expectations to move meaningfully lower to sustain a rally. One good CPI print helps but does not fix the problem when oil is pointing in the other direction simultaneously.
Investors are also watching the gold spot price and gold price chart for signs of a sustained breakout if inflation continues to cool.