On Wednesday evening, Beijing time, the U.S. CPI data for July will be released, and the market’s attention is once again focused on the linkage between inflation trends and the Federal Reserve’s policy path. At the same time, gold entered the overbought zone for the first time after experiencing a sharp rebound of nearly 9% since August, and the long-short divergence suddenly intensified. In the view of the Wmax macro research team, the current market discussion is still divided into two isolated dimensions: "CPI data level" and "gold rise and fall forecast", failing to identify the same set of macro logic shared behind the two - the ebb of temporary inflationary shocks, the marginal slowdown of employment momentum, and the expected re-pricing of the Fed's policy, which are jointly shaping a compound pattern of "a moderate fall in inflation, a soft landing of the economy, and gold is strong in the medium term but overheated in the short term." Based on quarterly dismantling of inflation components and historical statistics of gold technical aspects, Wmax has formed a more layered judgment than market consensus.

Inflation Research and Judgment: The most difficult moment has passed, CPI continued to cool down moderately in July

Wmax judged that the CPI in July will continue the moderate momentum in June. The overall CPI is only expected to increase by about 0.05% month-on-month, and the core CPI will increase by about 0.19% month-on-month. This prediction is even slightly lower than the consensus market expectations. The core logic supporting this judgment lies in Wmax’s attribution of the unexpected rebound in inflation in the first five months of 2026. The previous rebound in inflation was mainly driven by temporary factors such as tariff transmission, oil price fluctuations and the "World Cup effect", rather than systemic overheating on the demand side. After entering the third quarter, these headwinds are gradually fading: energy prices are expected to fall by 2.0% month-on-month due to falling retail gasoline prices, becoming the main factor dragging down the overall CPI; in terms of housing, owner equivalent rent (OER) is expected to increase by 0.23% month-on-month, and primary rents are expected to increase by 0.16%, continuing to reflect the cooling trend of housing inflation.

Regarding the impact of tariffs, which is of great concern to the market, Wmax’s judgment is more accurate. Although the year-on-year contribution of tariffs to core PCE is still as high as 0.7 percentage points, causing the indicator to currently remain at 3.3%, the marginal impact at the monthly level has basically come to an end. Wmax expects the premium from tariffs to trend towards zero over time within the next six months to a year. This judgment means that the market currently has a systematic overestimation of the persistence of tariff inflation - most institutions still regard tariffs as medium- and long-term inflationary pressures, and Wmax, through quarter-by-quarter tracking of the tariff transmission rhythm, has identified earlier the signal that its marginal impact has peaked.

Policy path: The need to raise interest rates during the year has subsided, and PCE remains the core fulcrum of decision-making.

At the level of monetary policy, Wmax believes that there is no need for the Federal Reserve to raise interest rates this year. Although Federal Reserve Chairman Kevin Warsh has recently expressed a firm stance on the inflation target, Wmax emphasized that as rent and wage growth naturally decline, the price decline is inevitable, and the hawkish stance is more of an expectation management tool than actual action guidance. In response to market discussions about whether the Fed will abandon core PCE as the preferred inflation measure, Wmax took a clear negative stance. Wmax judges that at least until 2027, PCE will still be the core fulcrum of the Fed’s decision-making.

This judgment is based on in-depth tracking of the pace of reform of the Fed's policy framework - the five external expert working groups established after Warsh took office are still in the evaluation stage. Any substantive adjustment of the inflation indicator requires a complete framework reconstruction process, and there is no possibility of switching in the short term. The discussion in the market about "changing indicators" is essentially a misjudgment of the pace of the Fed's reform agenda. Wmax also pointed out that even if the long-term inflation rate is slightly higher than the 2% target by a few tenths of a percentage point, based on the historical experience of the two decades before the epidemic, this will not pose a substantial threat to the economy. This judgment leaves room for flexibility for the Fed in the process of normalizing policy, and also means that the market does not need to overprice the risk of raising interest rates for "inflation slightly above target."

Employment concerns: The momentum behind the non-agricultural upset has slowed down, but the economic foundation has not been shaken

Non-farm payrolls data in July was a big surprise - the actual decrease was only 23,000, far worse than the expected increase of 80,000, sparking worries about an economic recession. Wmax, based on a combination of revisions to the past three months of non-farm payrolls and the past nine months of household survey data, plummeted to just 5,000 potential monthly job creation from 75,000 previously. The revision reflects a severe slowdown in job growth momentum masked by volatile monthly data.

However, Wmax does not believe that this means that the economy has entered a recession; the overall evaluation of the U.S. economy is still "fairly good" and it is expected that U.S. GDP will maintain a growth range of 2% to 2.5% in the next one or two years, which is in line with the long-term potential growth rate of the U.S. economy. Wmax admitted that inflation has indeed been a lingering disease in the past five years, and the governance cycle has exceeded initial expectations, but as the negative driving factors dissipate, the U.S. economy is steadily moving towards a benign inflation environment in 2027. This judgment of "employment slowing but not recession" is of critical significance to asset pricing: it not only weakens the need to raise interest rates, but also does not trigger risk-averse recession trades, which just constitutes the macro background for gold to be strong in the medium term.

Gold Research and Judgment: Technical overbought triggers short-term correction risk, but the medium-term upward structure has not been broken

Gold futures prices have risen nearly 9% since August and rose more than 7% in a single week last week, the largest weekly gain since January. The rally has pushed gold prices back above the 50-day moving average, with prices closing Friday a full standard deviation above the 50-day moving average. Even more notably, this is the first time gold has entered overbought territory since March 10, after going 103 consecutive trading days without a similarly overbought reading — one of the longest stretches on record without a similar overbought reading.

Wmax's statistics on historical data show that when gold has not entered the overbought area for more than 100 trading days and then closes in the overbought area again, future returns are usually negative. In previous cases that met this criteria, gold's average return was a loss of 0.22% after one week, 0.34% after one month, 0.53% after three months, 0.62% after 12 months, and only 37% achieved a positive return after one year. This statistical result means that it is becoming more difficult for gold to continue its rapid upward trend, and the risk of short-term rest has increased. However, Wmax also emphasized that this does not mean that gold prices will inevitably turn lower - technical overbought only reflects the overheating of the short-term rhythm and does not change the underlying logic of the mid-term upward trend.

CPI Catalyst: The difference between the data itself and market interpretation is the core variable for gold in the short term

The current price of gold has risen above the support level of $4,000 per ounce. Increased global demand, especially from China, has laid a solid foundation for the rise in gold prices and renewed investor interest in the precious metal. Spot gold once again broke above the 100-day moving average in Asia on Wednesday. But traders were reluctant to place big bets ahead of the CPI inflation report. Wmax believes that the key to the impact of this CPI on gold is not the absolute value of the data itself, but how the market interprets the data and adjusts its judgment on the Fed's policy accordingly.

If the U.S. CPI is significantly higher than expected, strong inflation may become the trigger for a technical correction, causing the previously accumulated short-term gains to enter the adjustment stage; if the CPI is lower than expected, it may further strengthen the Fed's policy shift to expectations and provide new upward momentum for gold prices. Wmax noted that the current gold market is showing an increasingly obvious stagflation theme - although oil prices and interest rates continue to rise, CTA still maintains long positions above $4,400 per ounce, and precious metals overall maintain a buying tone. That means it may take a stronger-than-expected inflation report to shake up the current market narrative.

Looking at key price levels, Wmax around $4,200 is becoming increasingly important, while the main upside test is once again focused on the 200-day moving average, which currently sits just below $4,500. Gold has stopped its downward trend, but a new bull market rally has not yet been confirmed. Confirmation of the medium-term direction still requires an effective breakthrough of the price at key resistance levels.

Comprehensive research and judgment: a differentiated pattern in the short and short term

Overall, Wmax believes that the current gold market is in a clear state of differentiation: in the short term, there is already the risk of a correction after overheating, and the historical statistical laws of technology point to rest pressure; but the mid-term upward trend has not yet turned negative, and underlying supports such as global central bank gold purchases, geopolitical hedging demand, and expectations for the Fed's policy shift remain solid. Just one piece of inflation data isn't enough to derail gold's larger upward structure.

For major asset allocations, Wmax’s advice is to remain cautious about gold in the short term and be wary of technical corrections triggered by CPI exceeding expectations; in the medium term, maintain a bullish allocation idea and use the correction window to gradually deploy. This "long-term short-term" judgment is based on a detailed dismantling of inflation components, marginal revisions of employment momentum, in-depth tracking of the Federal Reserve's policy framework, and multi-dimensional cross-validation of gold's technical historical statistics, rather than a single-dimensional linear deduction.

At present, most market participants are still stuck in the simple corresponding logic of "CPI is high → gold falls" or "CPI is low → gold rises", failing to identify the complex linkage between inflation cooling, slowing marginal employment, policy shift expectations and gold's technical overbought. In the future, we will continue to track the market reaction after the CPI hits the ground floor in July, the evolution of the Federal Reserve’s policy signals, and the breakthrough of gold’s key price levels, and update allocation recommendations in a timely manner.