Gold Prices Hold Firm Near Two-Month High as Rate Hike Bets Ebb

Gold prices steadied near a two-month high on Thursday after a recent rally fueled by cooling US inflation, as traders wait for confirmation from upcoming producer price data.

Fed policymakers are likely to feel little urgency to raise interest rates in September following the latest inflation figures, which showed a 3.4 per cent year-over-year increase in the Consumer Price Index (CPI) for July, down from 3.5 per cent in June.

Expectations of lower interest rates tend to support gold by reducing its opportunity cost as a non-yielding asset, with traders now pricing in only a 40 per cent chance of an interest rate hike at the Fed's September meeting, down from about 54 per cent seen a week before.