Gold slips below $4,400 as Fed path and Hormuz talks cap recent rally

Gold prices edged lower on Friday after retreating from a 10-week high, as investors weighed a less aggressive Federal Reserve outlook against uncertainty over efforts to reopen the Strait of Hormuz.

The metal remained on track for a second straight weekly gain, however, after a softer U.S. inflation backdrop reduced pressure on the Fed to raise interest rates.

At 20:49 ET (00:49 GMT), XAU/USD fell 0.4% to $4,335.56 an ounce, while Gold Futures declined 0.7% to $4,391.34.XAG/USD slipped 0.6% to $64.09 an ounce, while XPT/USD fell 0.5% to $1,710.58. The US Dollar Index was down about 0.1% at 99.90.

Soft U.S. data strengthen case for Fed hold
Gold has pulled back after reaching a 10-week high earlier in the week, but remains on course for a second weekly advance.

Thursday’s 1.3% decline came as traders reassessed the rally following subdued U.S. inflation data, which suggested that the inflationary impact of the energy shock linked to the Iran war had eased in July.

Money markets now price roughly a one-in-three probability of a September rate hike, while investors will get additional employment data before the Fed’s next meeting and will closely watch Chair Kevin Warsh’s remarks at the central bank’s Jackson Hole symposium later this month.

ANZ said the latest U.S. producer-price data reinforce that view. Headline PPI was unchanged in July, while core PPI rose 0.2% from the previous month, with both readings below consensus.
The softer PPI followed this week’s CPI report, which also showed relatively contained price pressures. Together, the readings support the case for the Fed to leave rates unchanged in September, although upcoming inflation and employment data will continue to determine whether that view holds.

For gold, the prospect of no immediate rate hike remains supportive because bullion does not generate interest income.

However, ANZ noted that profit-taking has emerged after the recent rebound, particularly after the metal moved through its 100-day moving average, an important technical barrier.

Hormuz uncertainty keeps energy risks in focus
The inflation outlook remains closely tied to developments in the Middle East. Investors continue to monitor efforts by Washington and Tehran to end the conflict and reopen the Strait of Hormuz, with the outcome carrying significant implications for energy prices.

Any renewed flare-up could push oil prices higher and revive inflation concerns, potentially strengthening the case for tighter monetary policy.

Conversely, a sustained reopening of the waterway would ease supply pressures and remove some of the inflation risk that has complicated the Fed outlook since the U.S.-Iran war began in late February.

Gold’s recovery above the psychologically important $4,000-an-ounce level in recent weeks has also benefited from renewed investor demand and stronger central-bank purchases, particularly from China.

The metal moved above its 100-day moving average for the first time since April earlier this week, although it has since fallen back below that level.
ANZ likewise said the recent rebound has attracted profit-taking despite the improving rate outlook. The bank’s assessment is that softer inflation has reduced the immediate risk of a Fed hike, but the combination of Middle East energy risks and stretched positioning means gold’s gains may be vulnerable to consolidation.