June US producer inflation fell to 5.5% YoY, below forecasts, lifting gold as traders trim Fed hike odds for July.
Gold prices rose to $4,060 in early Asian trading Thursday after US producer inflation cooled more than expected in June. The Producer Price Index (PPI) declined to 5.5% year-over-year from May’s revised 6.0%, missing the 6.2% consensus estimate. Monthly PPI fell 0.3%, reversing May’s 0.6% gain and defying expectations for no change.
The softer inflation data reinforced expectations that the Federal Reserve will hold rates steady at its July meeting. CME FedWatch Tool data showed rate hike probabilities dropping to 10.2% post-release, down from 16.6% earlier. Consumer inflation also slowed more than anticipated in June, further supporting the case for a pause.
Market sentiment shifted as traders priced in reduced tightening risks, though geopolitical tensions in the Middle East kept gold’s upside in check. Escalating US-Iran hostilities and rising crude oil prices could pressure central banks to maintain elevated rates longer, limiting gold’s appeal as a non-yielding asset.