Gold Surges Near $4,400 as Fed Rate Hike Expectations Fade

Gold prices have been on the rise, nearing $4,400 per ounce, as market expectations for Federal Reserve rate hikes diminish. The recent decline in retail sales and inflationary pressure are contributing to this trend. According to the CME FedWatch tool, there is now a 33.1% chance of a September Fed rate hike, down from approximately 47% a month earlier.

The US Census Bureau reported that US retail sales declined by 0.6% month over month in July, lower than expected. This figure follows last week's Consumer Price Index (CPI) and Producer Price Index (PPI) data, which also showed easing inflationary pressure. The report has weighed on the U.S. dollar (USD), underpinning the USD-denominated commodity price.

Lower interest rate expectations are generally positive for gold because the precious metal does not generate interest income. When bond yields and policy rates fall, the opportunity cost of holding gold declines, which can increase investor demand.