Gold Rebounds on Softer Inflation, But Dollar Strength Remains a Limitation

Gold prices rebounded to around $4,189 as softer U.S. inflation in the PCE report decreased the odds of an October Fed rate hike to 38%. The lower-than-expected inflation data also reduced expectations for further rate hikes.

The recent appreciation in the U.S. dollar has limited gold's upside potential, and Treasury yields remain a major risk for the metal. However, ETF demand continues to provide a powerful floor for gold prices.

The next major catalyst for gold will be Friday's Non-Farm Payrolls report, which could either reinforce or reverse the recent dovish Fed repricing. A strong labor market would likely boost expectations of further rate hikes, while a weak report would reduce those expectations and support lower inflation.