Gold eased on Friday, pulling back further from this week's 10-week high as traders locked in profits after a strong rally. Soft U.S. inflation data have reinforced bets that the Fed will hold rates steady in September, but tension around the Strait of Hormuz keeps the outlook for inflation and Federal Reserve policy uncertain.
XAU/USD fell 0.4% to $4,334.48 an ounce, while Gold Futures declined 0.7% to $4,390.30. The pullback extends Thursday's 1.3% decline, which came as traders reassessed the rally following subdued U.S. inflation data suggesting the inflationary impact of the energy shock linked to the Iran war eased in July. Even so, gold remains on course for a second weekly advance.
Soft data strengthen the case for a Fed hold
Money markets now price roughly a one-in-three probability of a September rate hike, while investors await additional employment data before the Fed's next meeting and will watch Chair Kevin Warsh's remarks at the central bank's Jackson Hole symposium later this month. ANZ said the latest U.S. producer-price data reinforce that view: headline PPI was unchanged in July, and core PPI rose 0.2% from the previous month, with both readings below consensus.
The softer PPI followed this week's CPI report, which also showed relatively contained price pressures. Together, the readings support the case for the Fed to leave rates unchanged in September, though upcoming inflation and employment data will continue to shape that view. For gold, the prospect of no immediate rate hike remains supportive, because bullion does not generate interest income. However, ANZ noted that profit-taking has emerged after the recent rebound, particularly after the metal moved through its 100-day moving average, an important technical barrier.
Hormuz uncertainty keeps energy risk in focus
The inflation outlook stays closely tied to the Middle East. Investors continue to monitor efforts by Washington and Tehran to end the conflict and reopen the Strait of Hormuz, an outcome that carries significant implications for energy prices. Geopolitical risk has intensified after the U.S. threatened to maintain an indefinite naval blockade of Iran amid stalled ceasefire efforts, and Iran accused the U.S. of escalating pressure, while attacks involving vessels in the region have added to concerns over energy flows through the strait.
A renewed flare-up could push oil prices higher and revive inflation concerns, potentially strengthening the case for tighter monetary policy. Conversely, a sustained reopening of the waterway would ease supply pressures and remove some of the inflation risk that has complicated the Fed outlook since the U.S.-Iran war began in late February.
Gold's recovery above the psychologically important $4,000-an-ounce level in recent weeks has also benefited from renewed investor demand and stronger central-bank purchases, particularly from China. The metal moved above its 100-day moving average for the first time since April earlier this week, though it has since fallen back below that level. ANZ said the combination of Middle East energy risk and stretched positioning means gold's gains may be vulnerable to consolidation, even as the softer inflation data have reduced the immediate risk of a Fed hike.
Source: Investing.com
Trading involves risk.
Risk Disclaimer
