Gold Prices Hold Steady as US Inflation Data Reduces Rate Hike Odds

Gold prices stabilized near a two-month high on Thursday as traders took a breather after a rally driven by cooling US inflation. The data, released on Wednesday, showed that the Consumer Price Index rose 3.4% in the 12 months through July, down from 3.5% in June.

Fed policymakers are likely to feel less urgency to raise interest rates next month following this development. As a result, traders now price 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. Attention is now focused on the Producer Price Index (PPI), due later in the day, for confirmation that price pressures are moderating.