Gold Slides for Second Session

Gold fell below $4,350 an ounce on Friday, extending losses from the previous session as investors locked in profits while assessing the Federal Reserve’s policy outlook and developments in the Middle East. Data released Thursday showed US core producer prices increased less than expected in July, offering further evidence that inflationary pressures are not broadly intensifying following Wednesday’s subdued CPI report. The softer price data reduces pressure on the Fed to raise interest rates in the near term, with markets now pricing in around a 35% chance of a 25 basis point rate hike in September, down from 55% a week earlier. Meanwhile, diplomatic efforts to reopen the Strait of Hormuz remain deadlocked, keeping investors cautious over the risk of an escalation that could drive energy prices higher and reignite inflationary pressures.

Gold fluctuated around $4,400 an ounce, remaining close to a 10-week high as softer US inflation data reinforced expectations that the Federal Reserve will leave interest rates unchanged next month. US producer-price inflation eased more than expected in July, helped by lower energy and food costs, providing further evidence that price pressures are not broadly accelerating. However, renewed tensions in the Middle East remain a risk, as any disruption could push energy prices higher and revive inflationary pressures. Oil is heading for a weekly gain as traders continue to monitor efforts by the US and Iran to end the conflict and reopen the Strait of Hormuz. Gold has also benefited from stronger investor demand and continued central-bank purchases, with China adding around 20 tonnes to its reserves in July, marking the 21st consecutive month of accumulation. Globally, central banks purchased an estimated 289 tonnes of gold in the second quarter.

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.