Gold Prices Drop Amid Stable US Inflation and Hawkish Fed Expectations

Gold prices retreated from their three-month high on Thursday, dropping to around $4,610 in early Asian trading. This downward movement comes as US core PCE inflation data held steady at 3.3% year-over-year (YoY) in July, meeting market expectations.

The release of the Personal Consumption Expenditures Price Index (PCE) data has led to increased expectations of a Federal Reserve interest-rate hike next month. The CME FedWatch tool now shows nearly a 38% chance of a 25 basis points (bps) rate hike in September, up from 36% before the data.

Markets are bracing for US Federal Reserve Chair Kevin Warsh's speech at the Jackson Hole Symposium on Friday, which could provide more clues on interest rates. Any hawkish remarks from Fed officials may weigh on gold prices in the near term.