Gold drops 1% after in-line U.S. inflation data

Gold prices took a 1% dip on Wednesday after U.S. inflation data came in line with forecasts, heightening expectations of an upcoming Federal Reserve interest rate hike. Spot gold dipped to $4,611.79 per ounce, marking a decline since its May peak. U.S. gold futures also saw a 0.6% drop to $4,667.10. The U.S. dollar surged 0.2%, making gold pricier for non-dollar holders.

Peter Grant of Zaner Metals noted that gold's price movement was primarily profit-taking. The Personal Consumption Expenditures Price Index, which the Fed uses for rate-setting, rose 3.7% over the previous year, slightly higher than the expected 3.6%. Traders now view a 40% chance of a rate hike next month, up from 36% pre-data, with a 60% chance that the Fed will keep rates steady, according to the CME FedWatch Tool.

High-interest-rate environments often diminish gold's appeal, but Grant sees potential for the metal to reassert an uptrend and reach new highs by mid-2027. Geopolitical developments include an agreement between Iran and Oman on the Strait of Hormuz, though reopening the waterway depends on U.S. acceptance of their terms. Silver fell 0.7% to $68.15 per ounce, platinum declined 0.3% to $1,851.55, and palladium rose 0.5% to $1,333.50.