Gold steadies near $4,360 as cooling inflation eases Fed rate hike expectations
Bullion is consolidating after retreating from its highest level in ten weeks, as easing energy-driven inflation and potential diplomatic breakthroughs in the Strait of Hormuz reshape the outlook for monetary policy and safe-haven demand.
Spot gold added 0.2 per cent to reach $4,359.73 an ounce during early Asian trading, recovering from a 1.3 per cent decline the prior session. The precious metal remains on track for a second consecutive weekly advance, even after dropping below the $4,400 mark.
This stabilization reflects a shift in market expectations regarding the Federal Reserve's next moves, following a subdued US inflation print for July. The data suggests that the severe energy-price shocks triggered by the US-Iran war in late February are fading, reducing the pressure on policymakers to pursue an aggressive monetary tightening cycle.
Derivatives markets currently assign a 33 per cent probability to a September interest rate increase. Market participants are now looking ahead to upcoming employment reports and policy guidance from Fed Chairman Kevin Warsh at the Jackson Hole conference later in August.
Traders are also monitoring diplomatic prospects for a deal to reopen the Strait of Hormuz, a critical chokepoint for global energy supplies. While a resolution would ease supply constraints, any renewed flare-ups in the region risk driving up energy costs and reigniting the inflationary pressures that have supported bullion prices.
The commodity’s recent advance past the $4,000-an-ounce mark has been fueled by fresh investor demand and sustained accumulation by central banks, led by China. However, market professionals warn that the rapid ascent may be losing steam.
“The macro setup has turned more constructive, although positioning is less supportive and technical momentum is starting to look stretched after the recent rebound,” said Christopher Wong, a strategist at Oversea-Chinese Banking Corp. He cautioned that “consolidation risks remain around current levels.”
Earlier this week, gains pushed the metal above its 100-day moving average for the first time since April, a key technical milestone. The asset has since slipped back below that threshold, indicating that upward momentum is facing resistance.
The non-yielding nature of gold typically benefits from a pause in rate hikes, but an extended period of elevated borrowing costs could weigh on the metal by making fixed-income assets more attractive. In the wider precious metals complex, silver held steady at $64.55 an ounce, while platinum and palladium were unchanged and a broad gauge of the US dollar slipped slightly.
