Gold Nears Two-Month High Amid Ongoing Oil Price Volatility

Gold prices are nearing a two-month high of $4,450 an ounce as traders await Wednesday's inflation report. The rally began after last week's jobs data showed a decrease in US employment, which reduced the likelihood of a September Federal Reserve rate hike to 46% from 67%. However, oil prices are complicating the market outlook.

WTI crude oil topped $84 per barrel on Tuesday morning, while Brent crude climbed toward $90. Tim Waterer, chief market analyst at KCM Trade, commented that there appears to be a gulf between the US and Iran.

Economists expect Wednesday's CPI report to show headline inflation up 0.1% on the month and 3.4% annually, with core prices rising 2.5% year over year. The market is still deciding whether cooling jobs data or oil-driven inflation risk wins out before the Fed's September meeting.

The World Gold Council reports that global central bank gold purchases jumped more than 60% year over year in the second quarter to 289 tonnes. Deutsche Bank analyst Michael Hsueh projects $4,700 an ounce by year-end, while State Street's Aakash Doshi puts $5,000 in play if central bank and emerging-market buying continues.