Forex
Gold Sees Gains on Weaker US PPI Data, Fed Rate Hike Prospects Dim
Gold prices rose above $4,350 per ounce on Tuesday as weaker-than-expected US Producer Price Index (PPI) data reduced expectations for a Federal Reserve interest rate hike at its September meeting.
The PPI rose just 0.1% in July, below the forecasted 0.2%, indicating that inflationary pressures are cooling at the wholesale level. This softer reading has led traders to trim bets on a Fed rate increase next month, making gold more attractive as a non-yielding asset.
The probability of a 25-basis-point rate hike in September fell to 12% after the data release, down from 18% a day earlier, according to the CME FedWatch Tool. A lower likelihood of rate hikes typically boosts gold's appeal by reducing its opportunity cost.