Gold Rises as Inflation Data Dampens Rate Hike Bets

The price of gold rose to its highest level in over two months on August 12 after US inflation data came in line with expectations, reducing the likelihood of a Federal Reserve interest rate hike.

Spot gold increased by 0.9% to $4,406.64 per ounce, while US gold futures settled at $4,467.50, up 0.6%. The price of bullion climbed above its 100-day moving average of $4,387.22.

The inflation data showed that consumer prices in the US increased by 0.1% in July, matching estimates. This weakening of the argument for a rate hike was echoed by analysts, with Marex's Edward Meir saying, 'The CPI data has been encouraging... It was higher than last month, but it was in line with estimates, along with a weaker dollar and technicals which have all helped gold piggyback on it.'

The probability of an interest rate hike at the next Federal Reserve meeting now stands at 40%, down from 46% before the inflation data. A higher interest rate environment tends to reduce the appeal of non-yielding assets like gold.