Gold steadied near a more than two-month high on Thursday as traders paused after a rally fueled by cooling U.S. inflation, with attention turning to an upcoming producer price report for clues to prospects of near-term Federal Reserve rate hikes.
Brendon Thorne | Bloomberg | Getty Images
Gold fell nearly 1% on Thursday as investors locked in gains after prices climbed to two-month highs following U.S. inflation data that was in line with expectations, tempering expectations for a Federal Reserve rate hike next month.
Spot gold fell 0.9% to $4,366.38 per ounce. Prices touched their highest level since June 5 earlier in the session at $4,449.39.
U.S. gold futures dipped 1% to $4,423.60.
“4,500 is a big resistance point for gold. We touched it twice and gold tumbled from that point, with traders being jittery close to the 4,500-level at the moment,” said Bob Haberkorn, senior market strategist at StoneX.
The U.S. Producer Price Index was unchanged in July as a decline in goods prices offset a rise in services costs, indicating that inflationary pressures may persist.
The data followed Wednesday’s consumer price report, which showed U.S. inflation rose 3.4% in the 12 months through July, down from 3.5% in June and in line with economists’ expectations.
Markets are now pricing a 34% chance of a rate hike at the September meeting, down from 40% immediately after the PPI data, according to the CME FedWatch Tool.
Fed policymakers are unlikely to feel the urgency to raise rates next month after inflation cooled for a second consecutive month.
On Wednesday, however, Cleveland Fed President Beth Hammack reiterated the need to raise rates “right now”.
Lower interest rates reduce the opportunity cost of holding non-yielding bullion.
“(Gold) had a pretty solid 9% bump in a week behind Chinese and retail buying; seeing some profit-taking around 100 day moving average,” independent analyst Tai Wong said.
Meanwhile, oil prices declined on Thursday as investors assessed prospects for weaker global demand this year amid supply disruptions.
