Gold declines as sliding US inflation reinforces Fed hold bets

Gold prices have dipped as the drop in US inflation strengthens expectations of the Federal Reserve maintaining interest rates, according to wire material. Despite falling below US$4,400 an ounce on August 13, the metal showed little change, as traders assessed the Fed's interest rate strategy and the potential for a resolution to reopen the Strait of Hormuz.

A modest US inflation report indicated that the effect of energy price disruptions from the Iran conflict had diminished in July, diminishing the pressure on the Fed to adopt a more aggressive monetary policy. Forecasts indicate a one-in-three likelihood of a September rate increase before the Federal Reserve convenes again in September, with employment reports and Chairman Kevin Warsh's comments at the central bank's annual Jackson Hole symposium awaited.

The possibility of no rate hike is favorable for non-yielding gold, but persistently high rates could undermine bullion by making bonds more appealing. Central bank purchases, notably from China, have fueled gold's resurgence above the US$4,000-an-ounce mark in recent weeks. However, recent gains have taken the metal below its 100-day moving average for the first time since April, with technical momentum appearing weak following the recent rebound.

Metal strategist Christopher Wong from OCBC highlighted that while the macroeconomic outlook has improved, investor positioning is less compelling, and technical momentum is becoming stretched after the recent recovery. Spot gold rose by 0.2 percent to US$4,359.73 an ounce at 7:22 am in Singapore, slipping 1.3 percent on Thursday.

Silver remained relatively unchanged at US$64.55 an ounce, while platinum and palladium stayed flat. The Bloomberg Dollar Spot Index, a benchmark for the US currency, experienced a minor decline.