Gold prices ticked higher in Asian trading on Wednesday, with investors adopting a cautious stance ahead of fresh United States inflation data and updates on global trade.
However, gains remained limited as the U.S. dollar held near multi-week highs and expectations for prolonged Federal Reserve policy tightening persisted.
At 3:10 pm AEST (5:10 am GMT), spot gold rose by US$13.32, or 0.4%, to US$3,338.31 per ounce.
The precious metal showed signs of a tentative recovery, echoing the subdued bounce seen in early Tuesday trade, as market participants awaited the release of the U.S. producer price index (PPI) for June.
Meanwhile, the greenback climbed to fresh three-week highs on Tuesday, notching its seventh consecutive daily gain. This rally followed hotter-than-expected consumer inflation data for June, which showed the consumer price index (CPI) rising 0.3% month-on-month and 2.7% annually, aligning with market expectations.
These figures bolster the case for the Federal Reserve to delay any interest rate cuts, with the CME FedWatch Tool showing the probability of a rate cut in September slipping to 52.4%, down from nearly 60% before the CPI release.
The increased likelihood of higher-for-longer rates weighed on the precious metal, which typically loses appeal in a rising rate environment.
Additional pressure on gold came from renewed trade developments. U.S. President Donald Trump announced a preliminary trade deal with Indonesia late Tuesday, while also signalling plans to notify smaller trading partners of changes to U.S. tariff rates.
The developments added support to the dollar and dampened gold’s safe-haven appeal.
Gold’s performance was also influenced by broader moves in global bond markets. U.S. Treasury yields tracked higher alongside Japanese government bond yields, which rose amid political uncertainty in Tokyo.
According to a report by the Asahi Shimbun, Japan’s ruling coalition is likely to lose its majority in the upcoming upper house election on July 20, raising the spectre of political instability as Japan struggles to finalise a trade agreement with the United States.
In the short term, traders are expected to stay on the sidelines until U.S. PPI figures are released later Wednesday.
A print above the expected 2.5% annual increase and 0.2% monthly gain could reinforce the dollar’s rally and further erode gold’s support.
