Gold slips as US Dollar recovers despite softer US factory inflation

Gold prices fell on Thursday as the US Dollar regained strength, despite softer US factory inflation data. The XAU/USD pair traded at $4,365, a 1% decrease, after reaching a daily high of $4,449. The yellow metal struggled to benefit from early US Dollar weakness, which was relatively flat according to the US Dollar Index (DXY).

US Treasury yields declined as investors reduced their expectations of a Federal Reserve rate hike following July's Producer Price Index (PPI) data. The US 10-year Treasury yield dropped four basis points to 4.647%, and the US PPI edged lower from 5.5% to 4.7% year-over-year. Meanwhile, the number of Americans filing for unemployment benefits rose, surpassing forecasts.

The Federal Reserve now sees a 40% chance of a 25-basis-point rate hike and a 60% chance of a hold. Fed officials remained split on the issue, with some seeking a rate increase and others, led by Fed Chair Kevin Warsh, calling for rates to remain steady. Gold consolidated below the $4,400 level, with traders looking to book profits.

The next major support levels are the 50-day SMA at $4,145 and $4,100. If the $4,400 mark is reclaimed, it could pave the way for testing the $4,450 psychological level. Gold has historically been used as a store of value and a hedge against inflation, often increasing during turbulent times. Central banks hold significant amounts of gold, viewing it as a means to support their currencies.

The price of gold can be influenced by various factors, including geopolitical events and interest rates.