XAU/USD: Gold Slumps Back Toward $4,020 After US Inflation Sparks Brief Rally

Surprise downtick in inflation sent gold sharply higher but it just couldn’t hold on. Bitcoin, however, did.

🥇 Gold Gives Back Its Glitter

• Gold XAUUSD couldn't hold Tuesday's inflation-fueled surge.
• After jumping more than 2% to $4,100, bullion slipped back toward the $4,000-$4,020 area as traders quickly shifted their attention from cooler inflation to rising oil prices.
• The rally also ran into technical resistance near $4,102, where a descending channel — a pattern of lower highs and lower lows that signals a broader downtrend — once again proved to be a stubborn ceiling.
• In markets, sometimes the first move is emotional and the second is practical. Tuesday was all about softer inflation. Wednesday was about what higher oil prices could mean for inflation tomorrow.

📉 Inflation Cheers, Then Doubts

• June's US inflation report came in cooler than expected, with consumer prices falling 0.4% month over month and annual inflation easing to 3.5%, below economists' 3.8% forecast.
• That briefly boosted hopes the Fed could ease up on rate hikes. Those hopes faded a bit as oil prices climbed again, reviving concerns that energy costs could reignite inflation.
• Higher inflation typically keeps interest rates elevated, and that's usually bad news for gold because the metal pays no yield.
• Fed officials welcomed the softer CPI reading but said they'll need several more months of cooling data before declaring victory. Next up: the producer price index (PPI), another key gauge of inflation pressures.

💸 Bitcoin Keeps the Momentum

• Gold lost altitude, but Bitcoin BTCUSD refused to follow.
• The original cryptocurrency held near $65,000, up roughly 5%, while climbing back above its 50-day moving average — a closely watched technical indicator that often signals improving momentum.
• Traders sharply reduced bets on an immediate Fed rate hike after the CPI report. According to CME's FedWatch Tool, the probability of a July hike dropped to 17% from 42% the previous day.
• Markets still expect at least one rate increase later this year, with September remaining the main focus. At least Bitcoin seems happy to celebrate the softer inflation print.