Gold Prices Retreat After Hitting Two-Month High Amid Cooling Inflation Expectations

Gold prices retreated on Thursday after hitting a two-month high earlier in the session. Spot gold fell by over 1% to $4,354.58 per ounce at 12:58 a.m EDT (1658 GMT). The precious metal had reached its highest level since June 5 at $4,449.39.

The decline came as investors locked in gains following the release of US inflation data that met expectations. The data showed a 3.4% rise in consumer prices over the past year, down from 3.5% in June and in line with economists' forecasts.

Cleveland Fed President Beth Hammack reiterated the need for rate hikes 'right now', but markets are now pricing a 35% chance of a hike at the September meeting, down from 40% immediately after the data release. Lower interest rates reduce the opportunity cost of holding non-yielding bullion.

Independent analyst Tai Wong attributed the price drop to profit-taking around the 100-day moving average. The US Producer Price Index was unchanged in July as a decline in goods prices offset a rise in services costs, indicating that inflationary pressures may persist.