June US inflation fell to 3.5% YoY, below forecasts, reducing expectations for further Fed tightening this year.
Gold prices climbed 1.5% to $4,050 as US consumer inflation data undershot estimates, easing pressure on the Federal Reserve to raise rates. The June CPI slowed to 3.5% YoY from 4.2%, below the 3.8% forecast, while core inflation dipped to 2.6% from 2.9%.
Investors slashed Fed rate hike bets, with money markets now pricing in just 18 basis points of tightening by year-end, down from over 35 bps. The shift follows signs of cooling inflation, though energy prices rose due to Middle East tensions.
The softer data prompted a rebound in XAU/USD, which had fallen to daily lows of $3,983. Fed officials noted progress but warned inflation remains above the 2% target.