Gold Steadies Near $4,600 as Inflation Data Weighs on Rates

Gold prices have steadied near $4,600 after inflation data showed price pressures remained above the Federal Reserve's target. The metal had pulled back following a release of US inflation data that indicated a 3.7% rise in the Personal Consumption Expenditures price index for the year through July.

The data pushed the dollar higher and lifted Treasury yields, moves that typically weigh on gold as it pays no interest and is priced in dollars. The probability of at least a 25 basis point increase in rates has now risen to around 40%, up from about 36% before the release, with traders still expecting rates to rise by year end.

ANZ analysts say the debasement trade continues to attract buyers due to concerns around fiscal policy and its potential impact on the dollar's purchasing power. The Treasury doubled its planned buybacks of longer dated debt, sparking concerns about long-term yields and monetary policy interactions. This has sustained the debasement trade, with investors buying gold as a hedge against persistent deficits and heavy borrowing.

Chair Kevin Warsh is set to deliver his first major speech at the Jackson Hole symposium on Friday, where he will address how he plans to respond to inflation remaining above the Fed's 2% goal. Investors are looking for clarity after Warsh moved away from traditional forward guidance since taking the job.