Gold Holds Firm on Tame US Inflation Data

Gold held above $4,400 an ounce on Thursday, hovering near ten-week highs as relatively stable US consumer inflation reduced pressure on the Federal Reserve to raise interest rates in the near term. Data released Wednesday showed US consumer inflation slowed for a second consecutive month to 3.4% in July, while rising just 0.1% from the previous month. Investors now await producer inflation data due later in the global day for further clues on the trajectory of price pressures. Markets now see around a 40% chance of a 25 basis point rate hike from the Fed in September, down from nearly 50% a day earlier. Gold also drew support from a pullback in oil prices as investors assessed the prospects of a deal to reopen the Strait of Hormuz. However, escalating rhetoric between the US and Iran amid deadlocked negotiations reduced the likelihood of an imminent agreement.

Gold rose above $4,420 an ounce on Wednesday, approaching a 10-week high as investors weighed US inflation data, Federal Reserve policy expectations and developments surrounding the Strait of Hormuz. US consumer prices rose broadly in line with forecasts in July, easing concerns over an imminent Fed rate hike. Following last week’s weak jobs report, the softer inflation picture encouraged investors to reduce expectations for a September increase, supporting demand for gold. Geopolitical uncertainty also remained a key driver, with Pakistan’s defense minister saying the US and Iran were “close to some sort of arrangement” to reopen Hormuz, while President Donald Trump claimed the US had “total control” of the waterway. Meanwhile, central-bank buying continued to underpin gold demand. China’s central bank added around 20 tonnes to its reserves in July, marking its 21st consecutive month of purchases. Global central banks bought an estimated 289 tonnes in the second quarter.

Gold rose toward $4,400 an ounce on Wednesday, recouping losses from the previous session as investors prepared for key US inflation data that could provide fresh clues on the Federal Reserve’s policy outlook. Markets remain divided over whether the Fed will raise rates by 25 basis points in September after keeping them unchanged in July, with rising oil prices reinforcing a hawkish bias. Meanwhile, traders assessed the prospects of a US-Iran deal to reopen the Strait of Hormuz amid shifting signals. Pakistan’s defense minister said Washington and Tehran are “close to some sort of arrangement” over the strait, while reports indicated that talks between Iran and Oman have reached an advanced stage. Elsewhere, gold continued to draw support from investment demand and central bank purchases, particularly from China. China’s central bank added about 20 tons to its reserves in July after buying around 15 tons in June, marking the largest monthly increase since October 2023.