Gold slips below $4,400 as Fed path and Hormuz talks cap recent rally

Gold prices slipped below $4,400 per ounce on Friday, ending a recent rally, as investors weighed a more measured Federal Reserve outlook against concerns over reopening the Strait of Hormuz. XAU/USD fell 0.4% to $4,335.56, while Gold Futures declined 0.7% to $4,391.34. XAG/USD dipped 0.6% to $64.09, and XPT/USD dropped 0.5% to $1,710.58.

The US Dollar Index was down 0.1% at 99.90. Gold had recently peaked at a 10-week high but is still on track for a second weekly increase. A 1.3% drop on Thursday occurred as traders reevaluated the rally after muted U.S. inflation data, indicating the energy shock from the Iran conflict had lessened in July. Now, traders price roughly a one-in-three chance of a September rate hike.

Additional employment data will be released before the Fed's next meeting, and Chair Kevin Warsh's remarks at the Jackson Hole symposium will be closely watched later this month. ANZ noted that softer U.S. Producer Price Index data in July, along with weaker core PPI, support the case for the Fed leaving rates unchanged in September, though upcoming inflation and employment data will continue to determine the outlook.

Gold's potential for no immediate rate hike remains positive as the metal does not generate interest income, but profit-taking has emerged following the recent rebound, especially after the metal surpassed its 100-day moving average. The inflation outlook is closely linked to Middle East developments, with efforts to resolve the conflict and reopen the Strait of Hormuz carrying significant implications for energy prices.

A sustained reopening could ease supply pressures and reduce inflation concerns, while renewed flare-ups could push oil prices higher and reignite inflation, strengthening the case for tighter monetary policy.