Gold prices moved lower on Thursday after pulling back from a fresh two-month high. Investors weighed softer U.S. inflation data against renewed concerns that higher energy prices could keep the Federal Reserve cautious about future interest-rate decisions.
At 01:54 ET (05:54 GMT), XAU/USD fell 0.5% to $4,388.64 an ounce, while gold futures also declined 0.5% to $4,446.12.
Elsewhere in precious metals, silver slipped 0.4% to $65.08 an ounce, while platinum dropped 0.6% to $1,746.71.
Soft U.S. CPI Eases Pressure on the Fed
Gold climbed as much as 0.9% on Wednesday to around $4,450, its highest level in more than two months, before giving back some of those gains.
The rally followed the latest U.S. inflation report. Consumer prices increased just 0.1% in July from the previous month, matching economists’ expectations.
The relatively soft reading suggested that the energy shock linked to the Iran conflict had not yet produced a stronger wave of consumer inflation.
As a result, expectations for an immediate Federal Reserve rate increase declined.
According to CME FedWatch data, markets were pricing a roughly 38% to 40% probability of a September rate hike, down from around 46% before the CPI release.
Fed Rate Outlook Remains in Focus
The Federal Reserve left interest rates unchanged at 3.50% to 3.75% during its July policy meeting. However, three policymakers voted in favor of raising rates.
Investors are now turning their attention to the latest U.S. Producer Price Index report, which could provide another important signal on inflation pressures.
Further employment and inflation data will also be released before the Fed’s September meeting.
Markets will also closely watch comments from Fed Chair Kevin Warsh at the Jackson Hole symposium later this month. Investors will be looking for clues about how policymakers are balancing inflation risks against economic growth.
Higher interest rates generally create a headwind for gold because the precious metal does not generate interest or dividend income.
Strait of Hormuz Tensions Keep Energy Risks Elevated
Geopolitical developments continue to influence both inflation expectations and gold prices.
Efforts to bring an end to the U.S.-Iran conflict and reopen the Strait of Hormuz have remained inconsistent, while restrictions on the strategically important shipping route continue.
Oil prices are heading toward a weekly gain as traders monitor negotiations between Washington and Tehran.
Persistently high energy prices could complicate the Federal Reserve’s inflation outlook and reduce its willingness to adopt a more accommodative monetary policy stance.
U.S. Dollar Offers Little Direction to Gold
The U.S. Dollar Index remained broadly unchanged around 99.96, providing little fresh direction for gold prices.
Lower Treasury yields and a weaker dollar had supported gold’s earlier advance, but both moves have since moderated.
Gold typically benefits when the dollar weakens because the precious metal becomes cheaper for buyers using other currencies.
Chinese Demand Continues to Support Gold
Despite the latest pullback, gold continues to receive support from strong underlying demand.
The precious metal has held above the psychologically important $4,000 level, while renewed Chinese buying has helped stabilize prices following an earlier selloff.
The People’s Bank of China has continued adding gold to its reserves, while broader investor demand for bullion has also improved.
Central-bank purchases remain an important source of long-term support for the gold market.
Gold Technical Outlook Improves
Gold also moved above its 100-day moving average this week for the first time since April, strengthening the technical outlook.
However, the metal is now approaching important resistance.
Tony Sycamore, senior market analyst at IG, said gold’s retreat from around $4,441 reflected a combination of profit-taking, hawkish Federal Reserve commentary and concerns about higher energy prices.
Gold is currently approaching downtrend resistance near $4,450, while the 200-day moving average around $4,499 represents another potential hurdle.
The broader downtrend resistance originates from the late-January record high near $5,602.
For now, gold traders remain focused on U.S. inflation data, Federal Reserve policy expectations, energy prices and geopolitical developments surrounding the Strait of Hormuz.
