Gold climbs 1%, near 2-month peak in run-up to US CPI report

Gold prices rose more than 1% on Wednesday, supported by easing expectations for a Federal Reserve rate hike next month as market participants awaited pivotal U.S. inflation data that is likely to shed light on the central bank’s future policy path.

Spot gold rose 1.1% to $4,413.69 per ounce by 1045 GMT. U.S. gold futures for December delivery rose 0.7% to $4,473.10 per ounce.

Bullion climbed to its highest since June 5 on Tuesday, but retreated after facing resistance at its 100-day moving average near $4,387 an ounce, ending lower for only the second time this month.

“Following weaker U.S. payrolls, the focus is on U.S. inflation,” said UBS analyst Giovanni Staunovo.

“A lower print would see the market pricing out further U.S. rate cuts and further support the gold price, but with still-high U.S. gasoline prices, that should cap the upside in the near term, with Fed official eventually retaining a hawkish message.”

The CPI likely rebounded 0.1% last month, a Reuters survey of economists predicted, after falling 0.4% in June.

Traders are now pricing in a 48% chance of a hike in September, down from 60% before the jobs report, according to the CME FedWatch Tool.

The U.S. consumer price index data due later in the day could alter the trajectory of interest rate expectations.

Fed Bank of Chicago President Austan Goolsbee said he is more concerned about too-high inflation than about any labour market weakness.

Bullion posted its strongest weekly performance since January on Friday, buoyed by weaker-than-expected employment data that led traders to scale back U.S. rate-hike bets.

Lower interest rates support gold as bullion does not yield any interest.

Oil prices extended gains on Wednesday after attacks on two ships reinforced worries about disruptions to Middle East supplies, with Iran saying the Strait of Hormuz would remain closed unless Washington accepts its conditions.

“Gold has decoupled somehow from oil lately, supported by renewed ETF inflows, strong Chinese and central bank demand,” Staunovo added.

Among other metals, spot silver was up 2.5% at $66.26 per ounce, having hit its since June 22 on Tuesday.

Platinum rose 1.3% to $1,767.70 and palladium gained 2.1% to $1,389.