Gold rises to over two-month high as US inflation data dampens rate hike bets
Traders are now pricing in about a 40% chance of an interest rate hike at the next Fed meeting, down from 46%
Gold surged to a more than two-month high on Wednesday (Aug 12), following a US inflation reading that met expectations. This data bolstered the belief that the US Federal Reserve will maintain interest rates steady in September. Gold prices climbed by 0.9 percent to US$4,406.64 per ounce by 1:30 pm EDT (1730 GMT) and surpassed the 100-day moving average, which is at US$4,387.22.
Bullion increased by more than 1 percent to its highest level since June 5 earlier in the session. US gold futures settled with a 0.6 percent rise at US$4,467.50.
In July, US consumer inflation marginally rose, increasing by 0.1 percent, aligning with forecasts. This growth occurred despite a 0.4 percent drop in June. Analyst Edward Meir from Marex stated that while the Consumer Price Index (CPI) data was encouraging, it was in line with expectations, along with a weaker dollar and technical factors that have all contributed to gold's performance.
Traders now estimate a 40 percent chance of an interest rate hike during the US Federal Reserve's September meeting, down from 46 percent before the inflation data, according to the CME FedWatch Tool. The US Federal Reserve maintained its benchmark policy rate at 3.5 to 3.75 percent during their meeting on July 29; however, three of the twelve voting policymakers favored a rate hike instead.
The focus has now shifted to the Producer Price Index, which is scheduled for release on Thursday. Meanwhile, both the US and Iran-aligned Houthis reported separate attacks on shipping on Tuesday, casting doubt on the prospects for resolving the Iran war. Analyst Meir warned that a resurgence of hostilities could cause oil prices to rise back to around US$100 per barrel, potentially leading to an interest rate increase and negatively impacting gold markets.
Among other precious metals, spot silver rose by 1.3 percent to US$65.49 per ounce, having reached its highest level since June 22 earlier in the trading day. Platinum increased by 0.9 percent to US$1,759.50, and palladium gained 0.5 percent to US$1,367.23.
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