$4,400 Gold Test: Will Fed Minutes Spark New Rally or Dollar Rebound?

Gold prices have rebounded near $4,400 as softer US economic data and inflation prints reduce expectations of a September rate hike by the Federal Reserve. The weaker dollar makes gold cheaper for buyers in other currencies, boosting demand.

The July consumer price index rose 3.4% from last year, down from 3.5% in June, while core inflation eased to 2.5%. Producer prices were unchanged, and retail sales unexpectedly fell 0.6% in July, their largest decline in over a year.

Traders now assign about a 30% probability to a September rate increase, down from 47% last month. Lower expected interest rates generally help gold, as bullion pays no interest. Tim Waterer, KCM Trade analyst, sees softer inflation and dollar weakness giving gold room to challenge $4,400 again.

Gold bulls will be looking for evidence in the Fed minutes that officials are becoming more comfortable waiting before raising rates again. However, policymakers may remain worried about persistent inflation, particularly with energy prices elevated.