Gold holds above $4,050 as easing inflation curbs Fed hike bets

Gold held above $4,050 per ounce as easing US inflation curbed Fed hike bets, while a firmer dollar capped gains.

The World Gold Council expects bullion to remain largely range-bound within about 5 percent of current levels under conditions of moderate economic growth and cooling but still elevated inflation, the industry body said in its latest outlook.

The Federal Reserve left its funds target range at 3.50 percent to 3.75 percent at its July meeting, with three officials dissenting in favor of a 25-basis-point hike. June core PCE inflation rose 0.1 percent month-over-month, easing to 3.3 percent year-over-year, while Q2 GDP slowed to 1.5 percent annualized from 2.1 percent in Q1. Traders now assign a 63 percent probability to a September rate increase, down from more than 80 percent a week earlier, according to CME Group's FedWatch Tool. The dollar index gained about 0.3 percent on Friday after falling 2.4 percent on Thursday, its steepest one-day drop since January 2023.

Gold's July gain of more than 1 percent marked its first monthly advance in five months, keeping the metal above the psychologically important $4,000 level. Escalating US-Iran tensions and higher crude prices — Brent below $86 per barrel after a Red Sea-driven spike above $100 — continue to support safe-haven demand. The next key event is the Fed's September meeting, with the September 17 rate decision likely to set the near-term direction.

Jefferies Global Head of Equity Strategy Christopher Wood said investors should resume accumulating gold and gold mining stocks after an extended pause. "The time has come for investors to start accumulating gold and gold mining stocks again after an extended pause to refresh," Wood wrote in a recent Greed and Fear report, drawing parallels between the AI investment boom and the dot-com bubble.

Colin Shah, Managing Director of Kama Jewelry, said gold is balancing competing forces. "The steady resilience of gold around the $4,080 mark reflects a market balancing two powerful forces — a hawkish monetary policy and escalating geopolitical risks in the Middle East," Shah said. "While the Fed has kept rates unchanged and reduced immediate expectations of a September hike, gold's safe-haven appeal is likely to revive."

Jateen Trivedi, VP Research Analyst at LKP Securities, expects MCX Gold to trade in a range of ₹1,40,000 to ₹1,44,000 in the near term, with the next major move depending on upcoming US economic data and Fed policy expectations.

Fed Policy Path Remains the Key Swing Factor

The dollar's recovery from Thursday's sharp selloff has temporarily capped gold's upside, but the broader macro backdrop remains supportive. With core PCE easing to 3.3 percent year-over-year and Q2 GDP slowing to 1.5 percent, markets are pricing a less aggressive Fed path. However, renewed Middle East tensions and higher energy costs could complicate the inflation outlook, keeping gold volatile in the near term. Silver, by comparison, has lagged gold's advance in recent sessions, with the white metal trading lower as industrial demand softened.

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