Gold Falls but Set to Record First Gains in Five Months

Gold fell 2% on Friday as the US dollar recovered from its lowest level in over a month recorded in the previous session, while the precious metal is on track to post its first monthly gain in five months after weak inflation data bolstered expectations that the Federal Reserve (the US central bank) will refrain from raising interest rates.

Spot gold fell 1.8% to $4,027.75 per ounce by 1359 GMT, after declining as much as 2% earlier in the session.

Gold has gained 0.5% since the start of the month, heading for its largest monthly increase since February.

These gains were driven primarily by weaker inflation data, which led traders to lower expectations for further interest rate hikes by the Federal Reserve this year, as well as by a drop in oil prices earlier this month to pre-war Iranian levels.

Han Tan, chief market analyst at the Pipit platform, said, “Although gold is on the verge of ending a four-month losing streak, the precious metal has struggled to expand its gains above the psychological level of $4,000.”

Data released on Thursday showed that US inflation slowed in June, but this decline may be temporary as oil prices rise due to renewed fighting in the Middle East.

Federal Reserve Chair Jerome Powell pledged this week a firm commitment to reducing inflation, without indicating readiness to raise interest rates. The dollar rose 0.5% after falling about 2.4% on Thursday, marking its largest single-day drop since January 2023.

A stronger dollar increases the cost of gold for holders of other currencies. According to CME Group’s FedWatch tool, markets currently price in a 65% probability of an interest rate hike in September, down from more than 80% a week ago. For other precious metals, spot silver fell 2.9% to $57.29 per ounce. Platinum dropped 2.5% to $1,618.97, and palladium fell 3.4% to $1,260.