Gold slipped on Thursday as a fresh climb in oil prices revived worries that inflation could stay elevated, strengthening the case for the Federal Reserve to hold rates higher for longer. A firmer dollar and the pull of higher yields kept pressure on non-yielding bullion even after softer inflation data.
Gold fell on Thursday because renewed gains in oil revived fears that inflation could stay high, reinforcing expectations that the Federal Reserve will keep interest rates higher for longer and boosting the dollar. At 21:31 ET, XAU/USD fell 0.59% to $4,036.62 an ounce, while gold futures slipped 0.24% to $4,042.10.
Softer inflation eases pressure on the Fed
The move came despite cooling price data. U.S. producer prices unexpectedly fell 0.3% in June, against expectations for no monthly change, following softer consumer inflation earlier in the week. Those back-to-back reports reduced expectations of an imminent Fed rate increase.
But investors largely looked past the backward-looking data. Fed Chair Kevin Warsh reiterated this week that policymakers remain committed to returning inflation to the 2% target, while stressing they would adjust rates if price pressures prove more persistent. Fed Governor Lisa Cook said she would support further policy action if inflation stayed elevated, and New York Fed President John Williams called current rates "well positioned" to bring inflation back toward target.
Oil rally revives inflation concerns
Renewed fighting in the Middle East kept investors cautious. The United States carried out a fifth consecutive day of strikes on Iranian targets, while President Donald Trump vowed to intensify operations until Tehran halts attacks on commercial shipping and reopens the Strait of Hormuz.
Brent and WTI crude extended recent gains as markets watched the risk of supply disruptions through the key shipping lane. Higher oil prices can complicate the Fed’s outlook, because if policymakers keep rates elevated for longer, firmer yields and a stronger dollar tend to reduce demand for gold. ANZ said the key question is whether the Fed views the latest rise in energy prices as a temporary supply shock or as a development that could spill over into broader inflation.
Source: Investing.com
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