Gold prices surged more than 2% on Tuesday to a fresh high, rebounding from a two-week low after softer-than-expected US consumer inflation data eased concerns about immediate Federal Reserve rate hikes. Spot gold edged up 0.1% to $4,056.69 an ounce on Wednesday, while US gold futures for August delivery slipped 0.1% to $4,063.80, according to The Times of India.
Fundamental Drivers: US Inflation and Fed Expectations
The rally was triggered by US consumer inflation data for June, which slowed more than expected as energy prices retreated. The softer reading prompted markets to reassess the Federal Reserve's interest-rate trajectory. According to the CME FedWatch Tool, traders now assign a 58% probability of a September rate hike, down from 76% before the inflation data. Federal Reserve officials welcomed the cooling in consumer inflation but cautioned that more evidence would be needed before concluding that price pressures were easing sustainably.
However, escalating tensions in the Gulf and rising oil prices kept investors cautious. Oil prices extended gains for a third straight session after US President Donald Trump reimposed a naval blockade on Iranian ports and warned of further strikes unless Tehran returned to negotiations. Higher crude prices have raised concerns that inflationary pressures could persist, strengthening the case for elevated interest rates.
Supply Side: Ghana and South Africa
On the supply front, Ghana's Gold Board reported that output from artisanal and small-scale mining was on track to match or exceed last year's record production. In contrast, South Africa reported a 5.4% year-on-year decline in mining output in May, according to the source.
Demand Side: China and Investor Sentiment
Analysts are closely watching China's economic performance, with growth expected to slow towards the lower end of Beijing's annual target, potentially weighing on demand from one of the world's largest gold consumers. Key economic data due later on Wednesday include China's second-quarter GDP, retail sales, and other indicators, as well as the US Producer Price Index (PPI).
Precious Metals Price Table
| Metal | Latest Spot Price (per oz) | Change vs Previous |
|---|---|---|
| Gold | $4,056.69 | +0.1% |
| Silver | $58.86 | +0.4% |
| Platinum | $1,636.28 | +0.3% |
| Palladium | $1,304.10 | -0.1% |
Price Outlook
Citi Research has left its zero-to-three-month price target for palladium unchanged at $1,500 per ounce, and maintained its platinum target at $1,950 per ounce, signaling confidence despite recent market fluctuations. The outlook comes as investors assess the impact of US monetary policy expectations and geopolitical risks on industrial and precious metals.
Investors now await the US Producer Price Index (PPI) for a clearer picture of inflation, while China's economic data will be critical for demand expectations. The next major catalyst for precious metals will be the Fed's policy decision in September, with the probability of a hike now seen at 58% according to the CME FedWatch Tool.
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