Gold slips from two-month high as focus shifts to US inflation

GOLD declined from a two-month high as traders weighed prospects of a US-Iran deal to reopen the Strait of Hormuz while awaiting a key US inflation report that could provide fresh clues on the US Federal Reserve’s appetite for an interest-rate hike. 

Bullion fell as much as 0.8 per cent in its biggest intraday decline since July. Oil prices rose as Iran reiterated plans to keep the waterway shut until its demands are met. The rebound in energy prices clouded the outlook for the US Fed’s rate path, while traders held back from making big bets ahead of US inflation data due on Wednesday (Aug 12).

The closely watched US consumer price index is seen rising 0.1 per cent in July following a 0.4 per cent decline in in June, according to the median projection in a Bloomberg survey of economists.

In the wake of Aug 7’s weak US jobs report, a moderation in price growth may help alleviate some of the inflation anxiety at the US Fed. A less aggressive path of monetary tightening typically supports gold, which pays no interest.

Gold has rallied above the key US$4,000-an-ounce support threshold in recent weeks, with renewed investor appetite for the precious metal backed by an increase in central bank purchases. Despite those gains, bullion remains about 17 per cent below levels before the Iran war began in late February.

Spot gold fell 0.5 per cent to US$4,369.15 an ounce at 4.40 pm in New York. Silver dropped 1.7 per cent. Platinum and palladium also declined. BLOOMBERG