While lower inflation is likely to prompt some short covering from traders and ultimately offer the yellow metal some much-needed support, the accumulation of broadly firmer-than-expected activity over the past few weeks and the Fed's clear inclination to hike again, suggests a final 25 bps rate increase in Fed funds is still in the cards for the July FOMC meeting. 

Nonetheless, as fears were rising that the Fed's bark could be as bad as its bite, weaker inflation is likely to tame these concerns and could see the yellow metal solidify in a higher range as markets look toward the easing of Fed policy.