Weaker US inflation data briefly lifted gold prices, but hawkish Fed expectations and Middle East tensions cap near-term gains.
Gold prices fell back below USD 4,000 per troy ounce after a brief rally fueled by softer US inflation data. June’s consumer and producer price reports showed slower growth, reducing expectations for Federal Reserve rate hikes to just one 25-basis-point increase by year-end.
Despite the shift in rate expectations, gold’s upside remains limited. Markets still price in at least one Fed hike, while Middle East conflict risks could drive energy prices higher, reinforcing hawkish sentiment. A sustained rally may require a fundamental change in the Fed’s outlook.
Traders now await further signals on monetary policy, with productivity gains from AI potentially easing inflation pressures longer-term.