Gold Steadies Ahead of US Inflation Data

Gold held steady near $4,400 an ounce on Thursday, retaining gains from the previous session as investors cautiously awaited key US inflation readings that could provide further insight into the Federal Reserve’s next policy move. The US producer price index report for August is due later today, followed by the consumer inflation report on Friday. The metal found support from a weaker dollar, as well as continued demand for its long-term hedging appeal despite near-term pressure from higher oil prices and bond yields. Oil prices climbed to multi-month highs as the US-Iran conflict intensified, stoking inflation concerns and strengthening expectations for near-term rate hikes. US Treasury yields also moved higher after the Treasury Department announced plans to buy back up to $6 billion in longer-term debt, disappointing some investors who had expected a more substantial increase.

Gold rose above $4,390 an ounce on Wednesday, supported by a weaker US dollar as investors assessed renewed inflation risks from escalating Middle East tensions and awaited key US inflation data for clues on the Federal Reserve’s policy outlook. The dollar slipped to a four-month low, with investors looking ahead to producer-price data due Thursday and the consumer price index on Friday. The releases could provide the final major input into expectations for the Fed’s policy decision on September 16. Meanwhile, oil prices surged to their highest level in more than three months as US-Iran tensions intensified. Iran’s Revolutionary Guard said it had fired ballistic missiles at a US-used military base in Jordan and attacked 10 ships on Wednesday, after Washington said it had destroyed five Iranian oil tankers. Markets are now pricing in around a 60% chance of a Fed rate hike at next week’s policy meeting.

Gold climbed above $4,400 an ounce on Wednesday, ending a three-session decline as the weakening dollar made the greenback-priced metal more affordable for buyers using other currencies. The dollar’s weakness was largely driven by the Japanese yen’s sharp appreciation this month, along with cautious investor positioning ahead of several major central bank decisions. The US Federal Reserve, European Central Bank and Bank of Japan are all expected to raise interest rates this month. Investors are also awaiting key US inflation data this week for additional clues on the Fed’s policy outlook. Meanwhile, oil prices continued to advance amid escalating Middle East tensions, increasing inflation concerns and strengthening expectations for rate hikes. While gold is traditionally viewed as a hedge against inflation, higher interest rates can weigh on demand for the non-yielding asset by making interest-bearing investments more attractive.