Gold edges higher on soft US inflation, Gulf conflict clouds rate outlook

Gold edged higher on Wednesday after U.S. inflation data eased concerns over near-term rate hikes, though renewed hostilities in the Gulf and a sharp rise in oil prices kept investors focused on the interest-rate outlook, limiting gains in non-yielding bullion.

FUNDAMENTALS

Spot gold was up 0.1% at $4,056.69 per ounce by 0108 GMT. U.S. gold futures for August delivery eased 0.1% to $4,063.80.

Gold jumped ‌more than 2% ⁠on ⁠Tuesday, rebounding from a two-week low, after data showed U.S. consumer inflation slowed more than expected in June as energy prices retreated.

The moderation in inflation was, however, insufficient to persuade financial markets to fully price out a U.S. interest-rate increase this year, as renewed conflict in the Middle East fuelled concerns about higher energy prices and inflation.

Oil prices extended gains to a third consecutive session as U.S. President Donald ⁠Trump reimposed ‌a naval blockade of all Iranian ports and threatened to hit power plants and bridges next week unless Tehran resumes negotiations, in the latest ⁠U.S. escalation of the conflict.

Top Federal Reserve officialswelcomed cool inflation figures, but said they would need more such readings to feel confident that price pressures are truly easing.

A fuller picture of inflation in June will emerge when the government publishes its Producer Price Index later in the day.

Traders now see about a 58% chance of a rate increase at the Fed’s September meeting, versus 76% before the report, CME FedWatch Tool’s data ‌showed.

Investors awaited China’s second-quarter economic data, with analysts expecting growth to slow toward the lower end of Beijing’s annual target, potentially dampening demand from one of the world’s largest ⁠gold consumers.

On the supply side, Ghana’s Gold Board said artisanal and small-scale mining output was on track to match or exceed last year’s record, while South Africa reported a 5.4% annual decline in mining output in May.

Elsewhere, spot silver rose 0.4% to $58.86 per ounce. Platinum gained 0.3% to $1,636.28 and palladium edged 0.1% lower to $1,304.10.

Citi Research kept its zero to three-month point price targets unchanged at $1,950 an ounce for platinum and $1,500/oz for palladium.

DATA/EVENTS (GMT)

0200 China Urban Investment (YTD) YY June

0200 0200 China Retail Sales YY June

0200 0200 China GDP YY Q2

0200 0200 China Unemp Rate Urban Area June

1230 US PPI Machine Manuf’ing June