Gold fell 0.5% to $4,388.64 an ounce on Thursday, retreating from a two-month high touched a day earlier. Traders weighed softer U.S. inflation data against renewed concern that higher energy prices could keep the Federal Reserve cautious on rates, while unresolved tension over the Strait of Hormuz kept energy risk in view.
Spot gold dropped 0.5% to $4,388.64 an ounce on Thursday, retreating from a two-month high touched a day earlier. Gold Futures declined 0.5% to $4,446.12. XAG/USD slipped 0.4% to $65.08 an ounce. XPT/USD fell 0.6% to $1,746.71.
Soft CPI eases near-term Fed pressure
Gold climbed as much as 0.9% on Wednesday to around $4,450, its highest level in more than two months, before paring gains. The metal also gained about 1% around that print. U.S. consumer prices rose only 0.1% in July from a month earlier, matching expectations and suggesting the energy shock linked to the Iran conflict had not yet generated a stronger inflation impulse.
The data reduced expectations for a near-term rate hike. CME FedWatch showed markets pricing roughly a 38%-40% probability of a September increase, down from 46% before the CPI release. The Federal Reserve held rates at 3.50%-3.75% at its July meeting, though three policymakers dissented in favor of an increase.
Investors now turn to Thursday's U.S. producer price report for another inflation reading before the next Fed meeting, with Fed Chair Kevin Warsh's comments at the Jackson Hole symposium later this month also in focus. Higher interest rates remain a headwind for gold because bullion does not generate interest income.
Hormuz uncertainty keeps energy risk alive
Efforts to end the U.S.-Iran conflict and reopen the Strait of Hormuz remain intermittent, and the strategic waterway continues to face severe restrictions. Oil is heading for a weekly gain as traders monitor the latest attempts by Washington and Tehran to resolve the conflict. The U.S. Dollar Index was essentially flat around 99.96, offering little fresh direction to bullion, as lower Treasury yields and a softer dollar that had earlier helped gold's rally have since moderated.
Renewed demand has also supported gold after it held above the psychologically important $4,000 level, with the People's Bank of China extending its gold-buying streak. The metal moved above its 100-day moving average this week for the first time since April, adding to the improving technical picture.
Tony Sycamore, senior market analyst at IG, said gold's overnight retreat from about $4,441 came as traders took profits ahead of the CPI report, while hawkish Fed commentary and higher energy prices also encouraged some selling. He added that the rebound has now brought gold toward downtrend resistance around $4,450, drawn from the late-January record near $5,602, with the 200-day moving average near $4,499 providing an additional barrier.
Source: Investing.com
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