NEW YORK: Gold rose more than 1 percent on Wednesday, supported by a softer dollar after a US inflation reading matched expectations, bolstering bets that the Federal Reserve will keep rates on hold in September.
Spot gold rose 1.1 percent to USD4,416.29 per ounce by 09:25 a.m. EDT (1325 GMT), and climbed above the 100-day moving average, which is currently at USD4,387.33. Bullion scaled to its highest level since June 5 on Tuesday. US gold futures gained 0.8 percent to USD4,476.10.
US consumer inflation increased slightly in July, potentially weakening the argument for an interest rate hike from the Fed next month. It edged up 0.1 percent last month, on par with estimates, after dropping 0.4 percent in June.
“The CPI data has been encouraging. It was higher than last month, but it was in line with estimates, along with a weaker dollar and technicals which have all helped gold piggyback on it,” Marex analyst Edward Meir said.
The US dollar index slipped 0.1 percent, making dollar-priced bullion more affordable for buyers overseas.
Traders are now pricing in about a 38 percent chance of an interest rate hike at the Fed’s September meeting, down from 46 percent before the inflation data, according to the CME FedWatch Tool.
The Fed on July 29 left the benchmark policy rate unchanged in the 3.50 percent-3.75 percent range, with three of the Fed’s 12 voting policymakers dissenting in favor of a rate hike instead.
A higher interest rate environment tends to reduce the appeal of non-yielding gold.
Attention now shifts to the Producer Price Index (PPI), due on Thursday.
Meanwhile, the US and Yemen’s Iran-aligned Houthis reported separate attacks on shipping on Tuesday as prospects for ending the Iran war appeared to dim.
“A resumption of the hostilities can make oil move back up towards the USD100 mark, in which case you could see interest rates move up and gold could struggle,” Meir said.
Among other metals, spot silver climbed 1.9 percent to USD65.87 per ounce, having hit its highest level since June 22 earlier in the session.
Platinum rose 1.6 percent to USD1,772.51, and palladium gained 1.5 percent to USD1,380.75.
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