Gold Prices Rebound Amid Weak US Dollar as Inflation Data Looms

The gold price has pulled back from its recent high of $4,510 as investors await this week's US PPI and CPI data. The stronger-than-expected August nonfarm payrolls report added to expectations for a Federal Reserve rate hike in September.

The rise in interest rate futures market pricing for a 25-basis-point Fed rate hike in September is now around 60%, up from about 50% prior to the employment data. The 10-year US Treasury yield was also at its highest level since November 2023, near 4.8%. Elevated real and nominal bond yields typically raise gold's holding cost relative to bonds.

This week's inflation data could confirm or deny market expectations for a September rate hike. If PPI and CPI come in higher than expected, the probability of a September Fed rate hike may rise further, pushing US Treasury yields up and putting downward pressure on gold prices.