FX.co ★ Gold Steadies as Traders Weigh Fed Outlook

Gold hovered around $4,050 an ounce on Thursday, holding to a tight trading range for a second consecutive session as investors weighed the Federal Reserve’s policy outlook in the wake of softer US inflation data and rising tensions in the Middle East.

Figures released on Wednesday showed that US producer prices unexpectedly declined in June for the first time in nearly a year, largely due to lower energy costs, while core PPI increased by a milder-than-expected 0.2%. This followed weaker consumer inflation data on Tuesday, easing fears that the Fed would move quickly to raise interest rates.

In response, markets pared back expectations of a Fed rate hike in September, with the implied probability slipping to about 44% from 50% the previous day. However, June’s inflation readings do not reflect the impact of the latest flare-up in hostilities between the US and Iran, after last month’s interim peace agreement effectively collapsed.