On Wednesday (September 11th), during the U.S. trading session, the gold market experienced significant volatility due to the impact of the U.S. CPI data.

After the release of the U.S. CPI figures, the spot gold price plummeted to near $2,500 per ounce, a drop of nearly $30 from the intraday high.

The U.S. CPI report dealt a significant blow to the possibility of a 50-basis-point rate cut, causing gold prices to fall on Wednesday.

The report prompted investors to reduce their expectations for a substantial interest rate cut by the Federal Reserve next week, leading to a strengthening of the dollar and U.S. Treasury yields, which put pressure on gold prices.

The U.S. Bureau of Labor Statistics reported on Wednesday that the U.S. Consumer Price Index (CPI) rose by 0.2% month-on-month in August, in line with market expectations.

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The U.S. CPI increased by 2.5% year-on-year in August, marking a fifth consecutive month of decline, which was in line with market expectations and below the previous value of 2.9%.

However, it is noteworthy that the U.S. core CPI rose by 0.3% month-on-month in August, the largest increase in four months, higher than the expected rise of 0.2%.

Economists believe that the core inflation rate is a better reflection of underlying inflation than the overall CPI.

The U.S. core CPI increased by 3.2% year-on-year in August, in line with forecasts.

Institutional analysis suggests that the higher-than-expected U.S. core inflation data will be an issue for the Federal Reserve to cut rates by 50 basis points next Wednesday.

The current focus is on the core CPI monthly rate, which tends to increase concerns about stubborn inflation.

FOMC members who worry about the monetary policy turning too quickly or too decisively will definitely strongly oppose a 50-basis-point rate cut next week.

Neil Birrell, Chief Investment Officer at Premier Miton Investors, commented on the U.S. CPI report, stating that the possibility of a 50-basis-point rate cut by the Federal Reserve next week has been significantly impacted by this figure.

According to the CME's "FedWatch" tool, the market currently estimates an 87% chance of a 25-basis-point rate cut by the Federal Reserve next week, up from 71% before the data was released.

After the CPI data indicated that the Federal Reserve might only cut rates by 25 basis points in September, the U.S. dollar index surged, recovering all of the day's losses and reaching an intraday high of 101.82.

The U.S. dollar index ultimately closed up about 0.1%, at 101.75.

Spot gold fell sharply to $2,500.74 per ounce after the release of the U.S. CPI data, a drop of nearly $30 from the intraday high of $2,529.13 per ounce.

Gold prices then rebounded somewhat from the low point.

Spot gold closed down 0.2% on Wednesday, at $2,511.28 per ounce.

FXStreet analyst Christian Borjon Valencia noted that after the U.S. inflation data increased the likelihood of a 25-basis-point rate cut by the Federal Reserve, gold prices fell from Wednesday's high of $2,529 per ounce.

Rising U.S. Treasury yields and a stronger dollar put pressure on non-gold assets.

The 10-year U.S. Treasury yield climbed 1.5 basis points to 3.655%.

Bob Haberkorn, Senior Market Strategist at RJO Futures, said, "Inflation still exists, and consumers still feel it.

If the Federal Reserve cuts rates by 50 basis points, it would signal that they are giving in to inflation.

At this juncture, the Federal Reserve is almost forced to cut rates by only 25 basis points."

Tai Wong, a New York-based independent metal trader, said, "The rise in core CPI, more or less, will solidify the likelihood of a 25-basis-point rate cut by the Federal Reserve next week.

Gold may have to wait a little longer to hit new historical price highs."

On Thursday, the U.S. will release the Producer Price Index (PPI) report, which could also help the market assess the scale of the Federal Reserve's rate cut in September.

In addition, investors are also watching the U.S. initial jobless claims report.

How to trade gold?

FXStreet analyst Christian Borjon Valencia noted that gold prices are suppressed, consolidating within the $2,500-$2,531 per ounce range.

The Relative Strength Index (RSI) is flat above the neutral line, indicating that neither buyers nor sellers have control of the situation.

Valencia said that if gold prices break through the historical high of $2,531 per ounce, the next resistance level will be the $2,550 per ounce threshold.

Once the latter is breached, the next target will be the psychological threshold of $2,600 per ounce.

Valencia added that, on the contrary, if gold prices fall below $2,500 per ounce, the next support level will be the low point of $2,470 per ounce on August 22nd.

In the case of further weakening, the next support area will be the convergence of the May 20th high and the 50-day simple moving average (SMA) (between $2,450-$2,440 per ounce).