Gold prices climbed to their highest level in more than two months after fresh U.S. inflation data indicated that price pressures are easing. The softer inflation reading reduced market expectations of an immediate interest rate hike by the U.S. Federal Reserve, making gold more attractive to investors.
According to the latest data, the U.S. Consumer Price Index (CPI) rose 3.4% year-on-year in July, slightly lower than 3.5% in June and in line with market expectations. Following the report, traders lowered the probability of a September Fed rate hike to around 40%, compared with about 54% a week earlier.
Spot gold rose sharply to an over two-month high as investors shifted toward safe-haven assets. Analysts noted that lower interest rate expectations generally support gold because the precious metal does not generate interest income, making it more attractive when borrowing costs are expected to remain stable.
Investors are now closely watching the upcoming U.S. Producer Price Index (PPI) data for further clues on inflation trends and the Federal Reserve's next policy decision. Silver, platinum, and palladium also recorded gains during the session.
