Gold rallies as US inflation miss boosts precious metals

Gold led a rally across precious metals Tuesday after the U.S. inflation rate came in below consensus estimates for July, reducing the likelihood of further Federal Reserve tightening.

"The softer inflation print removes the last hurdle for a September rate cut, which is strongly positive for gold," said Omar Tariq, a commodities analyst at Edgen. "The market had been pricing in a higher risk of a hawkish surprise."

The U.S. inflation rate for July missed economist estimates, according to the Bureau of Labor Statistics report released at 8:30 a.m. ET. The lower-than-expected reading pushed the dollar lower, with the DXY falling 0.4 percent, providing a tailwind for dollar-denominated commodities.

Silver and platinum followed gold higher as the broad-based rally in precious metals reflected expectations that the Fed now has room to ease policy. A weaker dollar makes commodities priced in the currency cheaper for overseas buyers, while lower interest rates reduce the opportunity cost of holding non-yielding assets like bullion.

The rally comes after gold had fallen to a near two-week low in the prior session, with the metal trading near seven-month lows earlier this month on hawkish Fed expectations. The inflation data shifts the narrative, with traders now watching for the Fed's next policy decision in September for confirmation of a pivot.

This article is for informational purposes only and does not constitute investment advice.