Gold Price Falls Ahead of U.S. Inflation Data as Fed Rate Hike Odds Rise to 60%

TLDR

Gold fell around 0.8% to $4,440 per troy ounce in early European trading Tuesday A weaker U.S. dollar provided some support, partly offsetting selling pressure The Japanese yen’s rally helped push the dollar lower, which lifted gold briefly Markets are pricing in about a 60% chance of a Fed rate hike next week China’s central bank ramped up gold purchases in August to the highest level since 2023

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Gold prices slipped on Tuesday as investors held back ahead of key U.S. inflation data due later this week. The metal fell around 0.8% to $4,440.10 a troy ounce in New York futures during early European trading.

Gold futures declined 0.7% to $4,447.11, while spot gold dropped 0.1% to $4,402.49. Silver edged up 0.2% to $66.32 an ounce. Platinum gained 0.3% to $1,828.78.

Gold Dec 26 (GC=F)

The U.S. Dollar Index slipped marginally to 98.90, which gave gold some support. A weaker dollar makes gold cheaper for buyers using other currencies, which tends to push prices up.

Yen Rally Puts Pressure on the Dollar

The Japanese yen continued a strong rally against the dollar on Tuesday. The yen approached its strongest level of the year after extending gains that started last week.

Traders have increased bets that the Bank of Japan will raise interest rates. That pushed the dollar lower, which in turn gave gold a short-term lift.

Gold has traded mostly around the $4,400 level in recent sessions. The metal bounced back from a floor near $4,000 in July and has stayed in a narrow range since.

Naeem Aslam of Zaye Capital Markets said gold holding above $4,400 shows defensive demand is still strong. He added that markets are balancing stronger U.S. economic data against ongoing geopolitical uncertainty.

Oil Prices and Fed Expectations Keep a Lid on Gains

Gold’s upside was limited by rising oil prices. Brent crude approached $100 a barrel after renewed clashes between the U.S. and Iran near the Strait of Hormuz.

Higher energy prices raise inflation risks, which complicates the picture for the Federal Reserve. Markets are currently pricing in about a 60% chance of a rate hike at next week’s Fed meeting.

That sentiment followed last Friday’s stronger-than-expected nonfarm payrolls report. The jobs data pushed rate hike expectations higher and weighed on gold.

Senior market analyst Tony Sycamore at IG said gold finished lower overnight around $4,406. He expects rising Treasury yields to create more headwinds for gold when markets reopen.

The key test this week will be the U.S. consumer price index and producer price index reports. Those numbers could shape whether rate hike bets hold or fade going into the Fed’s decision.

China’s central bank continued buying gold through August. The People’s Bank of China accelerated purchases to the highest monthly level since 2023, even as prices remained elevated. That buying is seen as a price floor for the metal.

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