Gold Jumps on Eased Rate Hike Expectations Ahead of Key Inflation Data

Gold prices rose nearly 1% to $4,406.34 per troy ounce on Wednesday as expectations of a Federal Reserve interest rate hike declined ahead of the release of key U.S. Consumer Price Index (CPI) data.

The decline in rate-hike expectations is seen as a major driver for gold, which typically benefits from lower interest rates due to its non-yielding asset status.

Kelvin Wong, Senior Market Analyst at OANDA, stated that the primary driver for gold's rise is the decrease in Federal Reserve interest rate hike expectations. Gold posted its largest weekly gain since January on Friday after weaker-than-expected U.S. jobs data prompted traders to scale back their bets on higher U.S. interest rates.

The CME Group's FedWatch Tool now assigns a 50% probability to a rate increase in September, down from 60% prior to the release of the jobs report. Today's CPI data could reshape interest rate expectations further.