Gold Holds Gains on Soft US Inflation

Gold traded around $4,050 an ounce on Wednesday, holding onto gains of more than 1% from the previous session as softer-than-expected US inflation data prompted traders to dial back expectations for Federal Reserve interest rates hikes. The annual US inflation rate slowed to 3.5% in June from 4.2% in May, coming in below forecasts of 3.8% as lower oil prices helped ease energy-related inflation. Consumer prices also fell 0.4% from the previous month, marking the first monthly decline since 2020. Meanwhile, Fed Chair Kevin Warsh reiterated the central bank’s commitment to restoring price stability during congressional testimony on Tuesday but refrained from signaling a more aggressive policy stance. Markets continue to price in roughly a 50% chance of a Fed rate hike in September, as renewed tensions between the US and Iran lifted oil prices and kept inflation concerns firmly on investors’ radar.

Gold climbed nearly 2% to $4,080 an ounce on Tuesday after weaker-than-expected US inflation data prompted investors to scale back expectations for Federal Reserve interest rate hikes. Annual inflation eased to 3.5% in June, while core inflation slowed to 2.6%, both below forecasts. The CPI also fell 0.4% month over month, its first decline since 2020. Despite the slowdown, inflation remains well above the Fed's target. Investors now await Federal Reserve Chair Kevin Warsh's first congressional testimony for signals on the policy outlook. Money markets still assign more than a 50% chance of a rate hike by the end of the quarter, with expectations supported by renewed geopolitical tensions. President Donald Trump said the US would reinstate a blockade on Iranian vessels transiting the Strait of Hormuz and called on countries benefiting from US efforts to secure the key shipping route to help cover the costs.

Gold increased 2.08% to 4085.02 USD/t.oz