Gold prices extended losses after US inflation data, specifically the Personal Consumption Expenditures Price Index, came largely in line with expectations. Spot gold fell 1.4% to $4,592.97 per ounce, after reaching its highest since May 14 on Tuesday. US gold futures dropped 0.9% to settle at $4,653.30. The dollar rose 0.3%, making greenback-priced bullion more expensive for holders of other currencies.
The PCE Price Index, the Federal Reserve's preferred inflation gauge, increased 3.7% in the 12 months through July, slightly above the 3.6% forecast by economists polled by Reuters. This data increased the perceived likelihood of a Fed rate hike next month, with traders now seeing a 38% chance, up from 36% before the data. Consequently, the probability of the Fed leaving rates unchanged decreased to 62%.
Peter Grant, vice president and senior metals strategist at Zaner Metals, noted that gold's price action before the data was largely due to profit-taking. He expects gold's uptrend to reassert itself, with potential to surpass $5,000 this year and reach new all-time highs by the second quarter of 2027. Non-yielding gold typically loses its appeal in high-interest-rate environments, but institutional demand, evidenced by $6.4 billion in inflows into gold-backed ETFs, suggests a more structural support for the market.
