Rising crude prices and geopolitical risks revive bets on a Fed rate hike, pressuring gold despite softer US inflation data.
Gold (XAU/USD) fell toward $4,025 in Asian trading Thursday as escalating US-Iran tensions and firm crude oil prices fueled expectations of a US Federal Reserve interest rate hike later this year. The move reversed Wednesday’s gains, when softer US inflation data briefly eased rate hike concerns.
The US Producer Price Index (PPI) dropped 0.3% in June, its steepest decline since April 2020, while the annual rate slowed to 5.5% from 6% in May. Consumer Price Index (CPI) data also showed easing price pressures, prompting traders to trim Fed rate hike bets and weakening the USD.
However, crude oil prices near one-month highs and supply disruptions in the Strait of Hormuz kept inflation risks alive. US airstrikes on Iranian coastal defenses and retaliatory attacks further stoked geopolitical uncertainty, supporting the USD and weighing on non-yielding gold.