Blocked by US Inflation, Can Gold Prices Soar Again?

Gold prices are facing a significant challenge this week ahead of United States inflation data, following a sharp rally at the end of last week. On Monday at 06:45 Western Indonesia Time, gold was trading at US$4,340.68 per troy ounce, edging down 0.02%. This slight decline contrasted with Friday’s 2.41% surge to US$4,341.13, which capped a weekly gain of 7.4%. The rally pushed gold well clear of the US$4,000 level that had dominated trading throughout much of July.

Analysts at UBS see considerable room for further gains over the next year, with a price target of US$5,200 by June 2027. They note that the US dollar’s strengthening appears to be losing momentum as market confidence in further Federal Reserve tightening erodes. A weaker dollar and lower US real yields are supportive for gold, while uncertainty over the Fed’s policy direction could also boost demand for defensive assets.

UBS highlighted that recent US economic data points to easing inflationary pressures and a softening labour market. They argue that upcoming data is unlikely to be strong enough to compel the Fed to raise interest rates again. If policymakers place greater emphasis on these indicators, the case for further rate hikes becomes significantly weaker, providing a tailwind for gold after months of pressure.

The recent rebound has also improved gold’s short-term technical picture, with prices now back above the 20-day and 50-day moving averages, though still below the 200-day trend and far from the record above US$5,590 per troy ounce set in January. Over the past 12 months, gold has still recorded a gain of more than 28%, despite a sharp correction from its peak earlier in 2026. UBS believes the threshold for renewed dollar strength has risen considerably, with a combination of weakening macro data, crowded market positioning, and growing debate over alternative inflation gauges pointing to further dollar consolidation or even depreciation.

The path to US$5,200 is unlikely to be smooth, given that gold has already traded in a range of more than US$1,600 this year. However, the latest recovery has reopened the possibility of reaching that target by June 2027. The key risk this week is the US inflation report for July, due on Wednesday, which will be crucial in determining the Fed’s next steps after recent weak labour market data. A lower-than-expected inflation print, particularly for core inflation, would strengthen expectations of easing rate pressure, potentially weakening the dollar and Treasury yields while boosting gold. Conversely, a higher-than-expected figure could revive hawkish Fed bets, strengthening the dollar and yields and triggering a correction in gold prices.