Gold rises to June high as soft US inflation curbs hike odds
Gold prices jumped to a two-month high after mild US inflation data sharply reduced the probability of a Federal Reserve rate hike next month.
Spot gold climbed 0.6% to $4,433.62 per ounce early Thursday, marking its strongest level since June 5. U.S. gold futures for December delivery mirrored this momentum, advancing 0.6% to settle at $4,493. The simultaneous jump in both spot and futures contracts underscores broad-based institutional demand for the precious metal.
The immediate catalyst for the price action was Wednesday's U.S. Consumer Price Index release. The Bureau of Labor Statistics reported that annual inflation cooled for a second straight month, coming in at 3.4% for the 12 months through July. This matched consensus expectations and represented a downtick from the 3.5% print recorded in June.
For portfolio managers, the implications of this data are straightforward: a lower probability of near-term rate increases reduces the opportunity cost of holding non-yielding assets. Interest rate derivatives reflected this shift almost immediately. The CME FedWatch Tool showed traders pricing in just a 40% chance of a September rate hike, a notable contraction from the 54% odds seen a week prior.
The shifting rate outlook alters the near-term trajectory for the dollar and Treasury yields, the two primary headwinds for bullion. While Federal Reserve officials are unlikely to find fresh urgency to tighten policy at the upcoming meeting, the data provides little confirmation that current monetary conditions are tight enough to guarantee a continued easing of price pressures. This lack of clarity limits the downside risk for gold.
The bullish sentiment extended well beyond gold into the broader precious metals complex. Spot silver posted a 1% gain to trade at $65.91 per ounce, having hit a peak not seen since late June in the prior session. Platinum added 0.3% to reach $1,762.70, while palladium edged up 0.1% to $1,371.20.
Market professionals will now focus on upcoming labor market indicators to determine if the Fed's restrictive stance is cooling the economy. Any further softening in employment data could cement the expected pause in rate hikes, providing a sustained floor under precious metal valuations.
