Gold (XAU/USD) edges lower on Thursday as traders look past back-to-back softer-than-expected US inflation reports and remain focused on renewed Middle East tensions, which are fueling concerns that higher energy prices could reignite inflationary pressure.
At the time of writing, XAU/USD trades around $3,983, down 1.90% on the day
Both the US Consumer Price Index (CPI) and Producer Price Index (PPI) reports for June came in below market expectations. However, Gold failed to benefit as the softer readings merely pushed back expectations of a near-term Federal Reserve (Fed) interest rate hike. Meanwhile, the US Dollar (USD) and US Treasury yields are staging a modest rebound after two consecutive days of losses, adding to the pressure on Gold.
Fed officials continue to stress the need to bring inflation sustainably back to the 2% target while noting that the labor market appears to have stabilized. This suggests that the central bank could raise interest rates later this year if inflation proves more persistent. Elevated borrowing costs reduce Gold’s appeal as investors seek higher returns from interest-bearing assets.