(Bloomberg) — Gold fell below $4,400 an ounce as signs of easing inflation bolstered expectations that the US Federal Reserve will hold interest rates steady next month.
Bullion fell as much as 1.5% to $4,343.91 an ounce on Thursday. US wholesale inflation decelerated in July by more than expected as energy and food costs fell, and money markets are pricing in less than a 40% chance of a September Fed hike.
While the prospect of no rate hike is generally positive for non-yielding gold, rates that remain elevated for an extended period could weigh on bullion by making bonds more attractive to investors.
Before the Fed meets again next month, additional reports on employment are due. Investors will also be focused on Chairman Kevin Warsh’s remarks at the central bank’s annual Jackson Hole symposium later in August.
Meanwhile, any flare-ups in the Middle East risk a return to the higher energy prices that have underpinned inflationary risks since the US-Iran conflict began.
Gold has traded above the $4,000 support threshold in recent weeks, with renewed investor appetite for the precious metal backed by an increase in central bank purchases, notably from China. Gains earlier this week took the metal above its 100-day moving average for the first time since April.
Spot gold dropped 1.3% to $4,350.02 an ounce at 4:44 p.m. in New York. Silver retreated 1.4% to $64.42 an ounce. Platinum and palladium also declined. The Bloomberg Dollar Spot Index, a gauge of the US currency, was little-changed.
–With assistance from Mark Burton.
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