Gold Pulls Back Ahead of US PPI Data

Gold slipped below $4,400 an ounce on Thursday after reaching a ten-week high earlier in the session, as investors adopted a cautious stance ahead of US producer inflation data for further insights on recent price trends. Data released Wednesday showed US consumer inflation eased for a second consecutive month to 3.4% in July, while increasing just 0.1% from the previous month. Markets now see around a 40% chance of a 25 basis point rate hike from the Federal Reserve in September, down from nearly 50% a day earlier. Gold also remained under pressure from elevated oil prices as hopes for a deal to reopen the Strait of Hormuz stayed limited. Escalating rhetoric between the US and Iran amid stalled negotiations further reduced expectations for an imminent agreement.

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.