Gold Prices Surge as Fed Rate Hike Bets Recede on In-Line CPI Report

Gold prices surged around 1% on Wednesday as traders reassessed their bets on Federal Reserve interest rate hikes following an in-line July consumer inflation report.

The data showed that headline and core consumer inflation decelerated, with the annual headline CPI ticking up 0.1% month-over-month (M/M) to 3.4%, while cooling year-over-year (Y/Y) basis from 3.5%. Core CPI increased 0.2% M/M to 2.5%, also decelerating on a Y/Y basis to 2.6%.

This gave the Federal Open Market Committee (FOMC) more breathing room to hold interest rates steady instead of hiking, with interest rate odds ticking up to 60% after the CPI report from 54%. Higher rate environments tend to weigh on non-yielding assets such as bullion.

However, gains in gold prices were capped by continued uncertainty over a Middle East peace deal to reopen the Strait of Hormuz. Oil benchmark briefly touched $90 a barrel amid mixed messaging on the strait's reopening.