Gold prices (XAU/USD) traded positively near $4,360 during the early Asian session on Friday, buoyed by softer US inflation data and reduced expectations for a Federal Reserve rate hike in September [1]. The US Bureau of Labor Statistics reported that the headline Producer Price Index (PPI) was unchanged month-on-month in July, compared to a -0.1% reading previously and below market expectations of a 0.2% increase. Core PPI, which excludes food and energy, rose 0.2% MoM, also below the forecasted 0.3%. On an annual basis, headline PPI increased 4.7% and core PPI rose 4.2% in July [1].
The cooler-than-expected PPI data sharply reduced market expectations for a Fed rate hike next month, with money markets now pricing in less than a 40% chance of a September hike. Lower interest rate expectations tend to support gold, as they reduce the opportunity cost of holding non-yielding assets like bullion [1].
Geopolitical tensions in the Middle East, particularly uncertainty around the reopening of the Strait of Hormuz, could introduce oil-driven inflation risks and potentially weigh on gold prices. Iran’s Foreign Minister Abbas Araghchi warned the US to 'be careful' after President Donald Trump claimed full US control of the Strait, while Iran's military command stated that no vessel could transit the waterway without Tehran's permission [1].
According to TD Securities, the current interest-rate environment remains constructive for gold, with the Fed likely to stay on hold despite rising energy prices. This combination is expected to keep gold well-supported within its higher trading range [1]. Technically, gold remains capped below the 100-day Moving Average at $4,385, with immediate support at the Bollinger Bands’ middle line around $4,155 and a deeper floor near $3,880. The Relative Strength Index (14) at 62.72 indicates firm but not extreme bullish momentum, suggesting further upside attempts are possible, though rallies may be vulnerable while prices remain under the 100-day MA [1].
CONCLUSION
Softer US PPI data has reduced expectations for a September Fed rate hike, providing support for gold prices above $4,350. While geopolitical risks and technical resistance remain, the current interest-rate backdrop is seen as constructive for bullion, with analysts expecting gold to stay anchored within its elevated trading range.