Gold Pauses at Two-Month High as Inflation Eases Rate Hike Expectations

Gold prices steadied near a two-month high on Thursday after a rally fueled by cooling US inflation. The Consumer Price Index rose 3.4% in the 12 months through July, down from 3.5% in June.

The decrease in inflation has led traders to dial back their expectations of a Federal Reserve rate hike next month. According to the CME FedWatch Tool, there's now only a 40% chance of an interest rate hike at the Fed's September meeting, down from about 54% seen a week before.

Fed policymakers may feel little fresh urgency to raise interest rates next month after data on Wednesday showed inflation cooling for a second straight month. Gold is in consolidation mode today, with traders waiting for confirmation from the upcoming Producer Price Index (PPI) data before committing to the next leg higher.