Gold prices fell below the US$4,400 level during Asian trade on Thursday, retreating from multi-month highs as the United States dollar found support in cautious markets amid the ongoing Middle East conflict.
By 4:05 pm AEST (6:05 am GMT), spot gold was trading 0.7% lower at US$4,377.81 an ounce.
Attention now turns to U.S. producer price index (PPI) data for further signs of cooling inflation, following a mild consumer price index (CPI) report.
Annual headline CPI inflation eased to 3.4% in July from 3.5% in June, in line with expectations.
Core annual CPI also matched forecasts, rising 2.5%, while monthly core CPI increased 0.2% after remaining flat in June.
The benign inflation readings further reduced expectations of a Federal Reserve interest rate hike in September, triggering a sell-off in the U.S. dollar and U.S. Treasury bond yields and supporting the gold price's advance towards $4,450.
However, gold prices quickly pulled back as Middle East tensions resurfaced after a senior Iranian source told Reuters there had been no progress in talks to revive the interim deal agreed in June and establish a timeframe for its implementation.
In response, U.S. President Donald Trump said in a post on Truth Social that the U.S. has "total control" over the Strait of Hormuz.
Traders are now pricing in a 33.9% probability of a rate hike at the September meeting, down from around 54% a week earlier, according to the CME Group FedWatch Tool.
