Gold rebounds towards 10-week high as markets brace for US CPI data

Gold prices surged nearly 1% on Wednesday, buoyed by a reduced likelihood of Federal Reserve interest rate hikes next month as investors awaited crucial US inflation data. The precious metal's spot price climbed to $4,406.34 per ounce, while US gold futures for December delivery rose 0.6% to $4,466.70. This marked a 10-week high for bullion, before it encountered technical resistance near the 100-day moving average at $4,387, and closed lower for the second consecutive day.

Kelvin Wong, a senior market analyst at OANDA, attributed gold's rise to the Fed's anticipated easing of rate hike expectations. Technical analysis showed a bullish break above the $4,200 level, which created a positive feedback loop. Bullion's largest weekly gain since January was recorded on Friday, following weaker-than-expected jobs data that prompted traders to cut back on rate hike bets.

Now, the market is pricing in a 50% chance of a September rate hike, down from 60% pre-jobs report, as per the CME FedWatch Tool. Lower interest rates typically boost gold as it yields no interest. The upcoming US Consumer Price Index data could alter the interest rate outlook. Fed Bank of Chicago President Austan Goolsbee expressed greater concern over high inflation than labor market weakness.

Meanwhile, oil prices continued to rise after separate attacks on shipping were reported on Tuesday, with Yemen's Iran-aligned Houthis and the US. However, prospects for ending the Iran war appeared dimmer, as Tehran stated the Strait of Hormuz would remain closed unless Washington accepted Iran's conditions. Silver increased by 1.2% to $65.46 per ounce, trading below its June 22 peak set on Tuesday. Platinum rose 0.6% to $1,754.10, and palladium gained 0.8% to $1,370.86.