Gold prices moved lower on Thursday as investors shifted their focus from weaker U.S. inflation data to the recent recovery in oil prices, raising concerns that inflation could remain elevated and delay any move by the Federal Reserve to lower interest rates.
Precious metals lose momentum
At 04:41 ET (08:41 GMT), spot gold (XAU/USD) declined 0.63 percent to 4,027.31 dollars an ounce, while gold futures fell 0.89 percent to 4,033.35 dollars.
Silver (XAG/USD) dropped 0.70 percent to 58.30 dollars an ounce, while platinum (XPT/USD) gained 0.34 percent to 1,638.20 dollars.
Softer inflation provides only temporary support
Earlier this week, gold rallied more than 2 percent after U.S. consumer price data showed the first monthly decline in inflation since 2020.
The weaker inflation reading lowered Treasury yields and weighed on the U.S. dollar as investors reduced expectations of an immediate interest rate increase.
However, the rally proved short-lived as attention quickly returned to the inflationary impact of rising energy prices.
Oil keeps pressure on the Federal Reserve outlook
Crude oil has remained close to recent highs following renewed geopolitical tensions in the Middle East, increasing concerns that higher energy costs could keep inflation above the Federal Reserve’s target.
Although gold is often viewed as a hedge against inflation, a prolonged period of elevated interest rates generally reduces demand for non-yielding assets by increasing the attractiveness of fixed-income investments.
Markets await producer price data
Federal Reserve policymakers welcomed the latest inflation figures but stressed that more evidence is needed before concluding that inflation is moving sustainably back towards target.
ANZ analysts said:
“Gold could remain rangebound in the near term as expectations for at least one Federal Reserve rate hike this year continue to limit upside.”
They also believe buyers are likely to return if prices weaken further because the longer-term outlook for gold remains constructive.
Investors are now awaiting U.S. producer price data for additional guidance on inflation. CME FedWatch currently indicates a 58 percent probability of a Federal Reserve rate increase in September, down from around 76 percent before the latest CPI release.
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