Gold drifts higher above $4,350 as softer US PPI data reduces September Fed hike bets
Gold price (XAU/USD) holds positive ground near $4,360 during the early Asian session on Friday. The precious metal gains momentum following US inflation data. Traders will take more cues from the US July Retail Sales report, which is due later on Friday.
Gold prices rose above $4,350 on Friday amid softer US Producer Price Index (PPI) data, which reduced expectations of a Federal Reserve interest rate hike next month. Traders were taking cues from the upcoming US July Retail Sales report. A softer PPI indicated that the Federal Reserve may refrain from raising interest rates next month.
The US Bureau of Labor Statistics released data on Thursday showing that headline PPI was unchanged month-over-month in July, below market expectations of 0.2%. Core PPI rose 0.2% month-over-month in July, against a forecast for a 0.3% gain. On an annual basis, headline PPI climbed 4.7% YoY, while core PPI rose 4.2% YoY. Lower interest rates reduce the opportunity cost of holding non-yielding bullion.
Iran's Foreign Minister warned Washington to be careful regarding tensions in the Middle East and uncertainty surrounding reopening the Strait of Hormuz. TD Securities noted that the interest-rate backdrop remains constructive for bullion, with a "Fed likely to remain on hold" despite upside energy prices. Gold has historically been used as a store of value, a medium of exchange, and a hedge against inflation and depreciating currencies.
Central banks, concerned about their currencies' stability, tend to diversify their reserves by purchasing gold.
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