Gold Advances After Tame US Inflation Data Eases Rate-Hike Bets

(Bloomberg) — Gold held near $4,400 an ounce after a subdued US inflation report relieved pressure on the Federal Reserve to hike interest rates.

Bullion climbed as much as 0.9%, briefly touching a 10-week high, before paring gains. That followed a similar advance in the previous session after data showed consumer prices rose just 0.1% in July from a month earlier. The inflation print suggests the impact of the energy-price shock from the Iran war continued to fade last month, and followed a soft US jobs report last week.

“Together, these developments are easing concerns around further Fed tightening in September and providing a supportive short-term macro view for gold,” said Ahmad Assiri, market strategist at Pepperstone Group Ltd.

A welcome email is on its way. If you don't see it, please check your junk folder.

Before the Fed meets next month, additional reports on employment and inflation are due. Investors will also be focused on Chairman Kevin Warsh’s remarks at the US central bank’s annual Jackson Hole symposium later in August. More aggressive monetary policy is typically a negative for gold, which doesn’t pay interest.

Despite the softer July numbers, any flare-ups in the Middle East risk a return to the higher energy prices that have underpinned inflationary risks since the war began. Oil is heading for a weekly gain after months of volatile trading, with traders tracking on-off efforts by the US and Iran to end the conflict and reopen the Strait of Hormuz.

Gold has rallied above the $4,000-an-ounce support threshold in recent weeks, with renewed investor appetite for the precious metal backed by an increase in central bank purchases, notably from China. This week’s gains took the metal above its 100-day moving average for the first time since April.

“Gold is starting to find its footing again,” said Christopher Wong, strategist at Oversea-Chinese Banking Corp. “If upcoming US data continue to point to softer growth and contained inflation, keeping Fed hike expectations in check, gold can potentially extend higher,” he said.

“We would still expect some volatility along the way, especially if yields or the dollar rebound, but compared with a few weeks ago, the balance of risks for gold has become more constructive,” Wong said.

Spot gold was steady at $4,408.13 an ounce at 11:10 a.m. in Singapore. Silver rose 0.2% to $65.43 an ounce, having gained 1% in the previous session. Platinum and palladium were down marginally. The Bloomberg Dollar Spot Index, a gauge of the US currency, was flat.