Gold advances as mild US inflation data puts Fed rate hike in doubt

Gold rose to a two-month high on Thursday, as milder-than-expected US consumer inflation erased hopes of an immediate Federal Reserve interest rate increase, according to wire reports. By 10:08 GMT, spot gold had climbed 0.6 percent to US$4,433.62 per ounce, following an earlier jump of nearly one percent to its highest level since June 5.

Similarly, US gold futures for December delivery increased by 0.6 percent to US$4,493. Federal Reserve policymakers reportedly appear less inclined to raise interest rates next month following data that indicated inflation decelerated on a year-over-year basis for the second consecutive month. While the Consumer Price Index rose 3.4 percent in the 12 months leading up to July, down from 3.5 percent in June, economists had anticipated such a result.

Traders now assign only a 40 percent probability of an interest rate increase at the Federal Reserve's September meeting, a decrease from about 54 percent seen a week prior, as per the CME FedWatch Tool. Lower interest rate expectations generally bolster gold by reducing the cost of holding the asset without generating income. Moving forward, markets will focus on the Producer Price Index (PPI) report, scheduled for later in the day, to gauge whether cooling price pressures are underway.

The July CPI report did not account for the most recent surge in oil prices, as attacks on ships in the Middle East persisted and discussions to end the conflict in Iran stalled. In terms of other precious metals, spot silver rose roughly 1 percent to US$65.91 per ounce, having attained its peak since June 22 in the preceding session.

Platinum climbed 0.3 percent to US$1,762.70, and palladium saw a 0.1 percent increase to US$1,371.20.