Gold inches higher as softer US inflation dims October Fed hike bets

Gold prices edged upward on Thursday as softer-than-anticipated US inflation figures dampened expectations of a Federal Reserve rate hike this month. The precious metal rose 0.5 percent to $4,175.19 per ounce by 0417 GMT, beginning the year on a positive note following a more than 6 percent drop in September. US gold futures for December delivery climbed 0.4 percent to $4,204.80.

Data released on Wednesday revealed that US inflation increased less than expected in August, while price pressures were revised downward for the previous month. This information diminished the likelihood of an October rate hike, with markets now pricing in a 38 percent chance, down from 45 percent prior to the release. While traders still believe there is a 97 percent probability of an increase in December, higher interest rates typically diminish gold's appeal since it does not yield interest.

Ilya Spivak, head of global macro at Tastylive, remarked, "Incoming data is going to be important... to see how the market deals with it and shapes rate-hike expectations." The market is currently grappling with conflicting forces. The upcoming US nonfarm payrolls report for September, set to be released on Friday, could limit gains for gold.

Meanwhile, the US dollar remained near a two-month high, which makes dollar-priced metals more expensive for holders of other currencies. Melek, global head of commodity strategy at TD Securities, added, "The worst of the correction is over for now and there is a case for higher prices." In geopolitical developments, Iran announced on Wednesday that it had received a US response to its latest proposal to revive the abandoned ceasefire in the Gulf, days after US President Donald Trump declared he had rejected it.

Silver prices rose 1.2 percent to $61.11, platinum climbed 0.7 percent to $1,717.35, and palladium increased 0.3 percent to $1,207.12.