Gold Falls 1% as US Dollar Recovers from Earlier Losses

The US Dollar (USD) has recovered some of its earlier losses, causing the price of Gold (XAU/USD) to decline by 1%. The XAU/USD pair is currently trading at $4,365, having reached a daily high of $4,449.

Despite softer US factory inflation, traders are trimming their Federal Reserve (Fed) hawkish bets following the release of July's Producer Price Index (PPI) data. The PPI edged lower from 5.5% to 4.7% YoY, while the Core PPI expanded 4.2% YoY.

Money markets have adjusted their expectations for the Fed's interest rates, with a 40% chance of a 25-basis-point rate hike and a 60% chance of a hold. Cleveland Fed Beth Hammack said that raising rates is necessary to curb growth and inflation, while Richmond Fed President Thomas Barkin noted that it's an 'open question' if a rate hike is needed.

The US economic docket will feature the release of July Retail Sales and the University of Michigan Consumer Sentiment on Friday. Gold is inversely correlated with the US Dollar and US Treasuries, which are major reserve and safe-haven assets.