Gold Gains 1% as Softer Inflation Reduces Fed Rate Hike Bets

Gold prices rose about 1% on Wednesday after U.S. July inflation data matched expectations, prompting traders to reduce expectations for a Federal Reserve rate hike in September.

Spot gold gained 1.1% to $4,416.15 an ounce, while gold futures rose 0.8% to $4,476.35. The move came after U.S. consumer prices increased just 0.1% month on month in July, while annual headline CPI slowed to 3.4% from 3.5%. Core CPI rose 0.2% month on month, with annual core inflation easing to 2.5% from 2.6%. All four readings matched forecasts.

The data gave the Fed more room to keep rates unchanged, particularly after a weaker U.S. jobs report. CME FedWatch showed the probability of rates remaining unchanged in September rising to 60%, from 54% before the CPI release. Lower-rate expectations tend to support gold because bullion does not generate interest income.

However, gains remain vulnerable to geopolitical developments. Brent crude briefly reached $90 as uncertainty over the reopening of the Strait of Hormuz kept energy markets volatile, creating a potential inflation risk for the Fed.

China is also providing support for gold demand. The People’s Bank of China added about 640,000 troy ounces to its reserves in July, extending its buying streak to 21 consecutive months.

For Southeast Asian traders, the next major test is $4,460-$4,495, where technical resistance is concentrated. A sustained break above this zone could strengthen the recovery, while renewed oil-price pressure could quickly reshape the Fed outlook and gold’s direction.