Gold slides on hot inflation, Natixis keeps $5,000/oz target

Gold prices tumbled after US inflation ran hotter than expected in July, strengthening bets that the Federal Reserve will keep interest rates elevated and pressuring the precious metal.

US personal consumption expenditures prices rose more than forecast last month, while core PCE, which strips out food and energy, matched expectations, according to Commerce Department data.

Treasury yields inched higher after the release, with the 30-year bond rate reaching levels not seen in nearly two decades. The 10-year yield had lost almost 8 basis points Tuesday before reversing course. Higher yields raise the opportunity cost of holding non-yielding bullion, deepening the selloff in gold.

Federal Reserve Chairman Kevin Warsh speaks Friday at the central bank's Jackson Hole symposium, where investors will parse his remarks for signals on the September policy decision. Natixis, meanwhile, sees gold back on a path to $5,000 per ounce as US debt concerns mount.

Hawkish Repricing Weighs on Bullion

The inflation print complicates the Fed's path to easing. A hotter-than-expected reading supports the case for holding rates higher for longer, or even resuming hikes, which typically weighs on gold and other rate-sensitive assets. The US dollar has strengthened on the hawkish repricing, adding further pressure on bullion priced in the currency.

The move extends a volatile stretch for the precious metals complex, where investors have swung between rate-cut optimism and inflation-driven caution. Rising real yields have been the dominant headwind, with the 30-year bond rate at levels last seen two decades ago signaling that the market expects borrowing costs to stay elevated.

Natixis's $5,000 Call Stands Apart

Natixis's $5,000 per ounce forecast contrasts with the near-term bearish tone, with the French bank pointing to mounting US debt concerns as a longer-term driver for bullion. The target implies substantial upside from current levels if the debt trajectory continues to deteriorate, even as the inflation data keeps the metal under pressure in the near term.

For traders, the immediate focus shifts to Warsh's Jackson Hole remarks and the September Federal Open Market Committee meeting. A hawkish signal would likely extend the selloff in gold, while any hint of easing could trigger a rebound in the metal.

This article is for informational purposes only and does not constitute investment advice.