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Gold steadies below $4,100 as oil-linked inflation fears lift rate-hike odds

CPI cooled in June, but investors stayed focused on rising crude prices amid US-Iran tensions that can keep inflation risk elevated.

Reported · Written up by our desk · Major Pairs

Gold prices remained heavy in early European trade, holding a offered tone and failing to regain acceptance above $4,100 after the prior session, according to FXStreet.

FXStreet said the backdrop is being driven by concerns about energy-driven inflation, with escalating US-Iran tensions and the closure of the Strait of Hormuz pushing crude oil higher. The analysis noted that Fed Chair Kevin Warsh’s emphasis on price stability kept alive expectations for at least one rate hike before year end, pressuring non-yielding bullion.

The latest data, however, was mixed for the rate narrative. The US Bureau of Labor Statistics reported headline CPI fell 0.4% in June, the biggest one-month drop since April 2020, and core CPI was flat, while both measures missed expectations; FXStreet said traders trimmed rate-hike assumptions and pushed the US dollar to a nearly four-week low.

FXStreet added that despite a quick fading of the initial reaction after Warsh’s congressional remarks, oil’s rise to nearly a one-month high continues to pose an inflation risk. Using the CME Group FedWatch Tool, the outlet said traders are pricing a possible Fed tightening in either September or December.

Latest closeGold $4,058.20 ▲1.5%|WTI crude $79.90 ▲2.2%

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