Gold Rises as US-Iran Peace Talks Eyed

Gold rose to around $4,380 an ounce on Friday but was down nearly 1% weekly on the week, its third consecutive weekly loss, as investors digested the latest US inflation data ahead of next week’s Federal Reserve meeting. US inflation held at 3.4% in August, in line with expectations, while monthly CPI rose 0.4%, the strongest increase in three months. Core CPI accelerated to 0.3% month-on-month, its largest gain since April and above expectations of 0.2%, although the annual rate eased to 2.4%, the lowest since March 2021. US producer prices also accelerated in August as the Iran war pushed wholesale energy costs higher, while last week’s labor market data pointed to continued resilience in employment. Markets have increased bets on a 25-basis-point Fed rate hike next week, with the CME FedWatch Tool now showing around an 86% probability, up from roughly 70% before the inflation data.

Gold rose to around $4,350 an ounce on Friday, recouping some losses from the previous session as investors looked ahead to the latest US consumer price index report that could determine whether Federal Reserve will raise interest rates next week. Data released Thursday showed US producer prices accelerated in August as the Iran war pushed wholesale energy costs higher. Markets are now pricing in roughly a 71% probability of a 25-basis-point Fed rate increase next week, up from 61% before the PPI data. Gold also found support from easing oil prices, though the escalating US-Iran conflict fueled concerns over higher inflation. Meanwhile, Treasury yields jumped following lower-than-expected purchases by the US Treasury Department during its first expanded buyback operation. Non-interest-bearing assets such as gold tend to underperform when yields rise. Gold is still on track to lose nearly 2% this week, marking its third straight weekly decline.

Gold fell to around $4,350 an ounce on Thursday as traders increased bets on a Federal Reserve rate hike next week following stronger-than-expected US producer price data. US PPI rose 0.4% in August, while annual producer inflation accelerated to 5.4%, above the 5.3% forecast, reflecting a surge in energy prices, alongside signs of greater cost pass-through across broader sectors. The data coincided with a fresh rally in oil prices amid escalating US-Iran strikes in the Middle East, prompting investors to price in a more than 70% probability of a Federal Reserve rate hike on September 16. Meanwhile, traders also raised bets on further ECB tightening after the central bank delivered an expected rate hike and warned that inflation risks remained tilted to the upside.