Gold Rises as Fed Rate Hike Odds Tumble with In-Line CPI Report

Gold prices rose about 1% on Wednesday after the US Bureau of Labor Statistics released its July consumer price index (CPI) report. The data showed that headline CPI ticked up 0.1% month-over-month, while cooling on a year-over-year basis to 3.4% from 3.5%. Core CPI, which strips out food and energy, increased 0.2% M/M.

The in-line readings likely give the Federal Open Market Committee (FOMC) more breathing room to hold interest rates steady instead of hiking, especially after the weak jobs report on Friday. Interest rate odds reflected such a move, with the CME FedWatch tool showing chances of the FOMC holding steady in September ticking up to 60% from 54%.

Gold's gains were capped by continued uncertainty over a Middle East peace deal to reopen the Strait of Hormuz. Oil prices fluctuated on Wednesday amid mixed messaging on the strait, with the global benchmark briefly touching $90 a barrel.

The People's Bank of China increased its gold reserves for a 21st consecutive month in July, adding about 640,000 troy ounces to reach 76.08 million ounces. Gold-backed Chinese ETFs have also continued to attract buyers, reinforcing stronger institutional demand seen in recent weeks.