Gold Bounces Friday But Can’t Escape Weekly Loss After Inflation Shock

Financial markets face several key events this week that could shake up the current bull run. The most anticipated is Friday’s summit between Presidents Trump and Putin in Alaska, aimed at ending the Ukraine war. Any peace agreement could boost European stocks and the euro while easing global inflation pressures. Meanwhile, Fed Chair Jerome Powell’s appearance at the Jackson Hole symposium in Wyoming poses risks, as any hints about September rate cuts could trigger market volatility. With 60% of global investors worried about stagflation, these events come at a critical time for markets hovering near record highs.

US wholesale inflation surged in July by the most in three years, dampening hopes for aggressive Federal Reserve rate cuts in September. The Producer Price Index (PPI) data showed inflation accelerating through the economy, even as consumer prices remained relatively stable. This split between wholesale and consumer inflation has created uncertainty about Fed policy, with traders now seeing only a 90% chance of a September rate cut, down from certainty earlier in the week. The data highlights ongoing tensions between President Trump’s push for lower rates and the Fed’s concerns about inflation risks from tariffs.

Gold prices are set to decline this week after US wholesale inflation data came in higher than expected in July. The stronger inflation report reduced expectations for a Federal Reserve interest rate cut in September, with traders now seeing only a 90% chance of a cut versus full certainty earlier. Gold typically performs better when interest rates fall, so this shift in expectations pushed prices down. Despite the weekly loss, gold remains up over 25% for the year, supported by geopolitical tensions and central bank buying.

Switzerland’s gold industry has firmly rejected Swatch CEO Nick Hayek’s proposal to impose a 39% export tax on gold bars shipped to the United States. Hayek suggested the retaliatory measure after President Trump imposed 39% tariffs on Swiss imports, though gold was later exempted. The Swiss Association of Manufacturers and Traders in Precious Metals warned that such an export tax would harm Switzerland economically and damage its reputation as a free trade advocate. Switzerland continues talks with U.S. officials to reduce the tariffs, which Trump justified by citing Switzerland’s trade surplus with America.

U.S. Treasury Secretary Scott Bessent criticized the Bank of Japan’s monetary policy stance, stating the central bank is “behind the curve” on inflation and needs to raise interest rates. In a Bloomberg TV interview, Bessent said Japan has an inflation problem with core inflation above 2% for over three years, and predicted the BOJ will be hiking rates soon. His comments contrast sharply with BOJ Governor Kazuo Ueda’s position that the bank isn’t moving too slowly. The remarks contributed to the yen strengthening against the dollar, with USD/JPY falling to three-week lows.