Gold Holds Near Two-Month High as US Inflation Cools

Gold prices steadied near a two-month high on Thursday after a rally fueled by cooling US inflation data. The Consumer Price Index rose 3.4% in July, down from 3.5% in June, which is in line with economists' expectations.

Fed policymakers are likely to feel little urgency to raise interest rates next month after the data release. Traders are now pricing in only a 40% chance of an interest rate hike at the Fed's September meeting, down from about 54% seen a week before.

Expectations of lower rates tend to support gold by lowering the opportunity cost of holding the non-yielding asset. The Producer Price Index (PPI) will be closely watched for confirmation that price pressures are moderating.