Gold pares losses as steady US PPI data strengthens rate-hold expectations

NEW YORK: Gold pared losses on Thursday after falling nearly 1 percent earlier in the session, as the US producer price data matched expectations and reduced bets for a Federal Reserve rate hike next month, while profit-taking kept prices below the USD4,500 level.

Spot gold fell 0.5 percent to USD4,386.69 per ounce by 09:26 a.m EDT (1326 GMT) after touching session’s low of USD4,363.44. US gold futures dipped 0.5 percent to USD4,444.00.

“4,500 is a big resistance point for gold. We touched it twice and gold tumbled from that point, with traders being jittery close to the 4,500 level at the moment,” said Bob Haberkorn, senior market strategist at StoneX.

The US Producer Price Index was unchanged in July as goods prices declined, higher services costs suggested inflationary pressures could persist.

The data followed Wednesday’s consumer price report, which showed US inflation rose 3.4 percent in the 12 months through July, down from 3.5 percent in June and in line with economists’ expectations.

Price growth is moderating in the US but remains above target which lends itself to a Fed that is more likely to hold rates in September, said Kyle Rodda, senior financial market analyst at Capital.com.

Markets are now pricing a 32 percent chance of a rate hike at the September meeting, down from 40 percent immediately after the PPI data, according to the CME FedWatch Tool.

Fed policymakers are unlikely to feel the urgency to raise rates next month after inflation cooled for a second consecutive month.

Cleveland Fed President Beth Hammack, however, reiterated on Wednesday the need to raise rates “right now”.

Lower interest rates reduce the opportunity cost of holding non-yielding bullion.

On the geopolitical front, oil prices declined on Thursday as investors assessed prospects for weaker global demand this year amid supply disruptions.

Meanwhile, Bank of Korea held a USD250 million stake in US-listed gold ETF as of end of June, a SEC filing showed.

Among other metals, spot silver slid 0.3 percent to USD65.11 per ounce, platinum dropped 1.7 percent to USD1,727.04, and palladium slipped 3.6 percent to USD1,320.63.