(Bloomberg) — Gold was little changed after retreating below $4,400 an ounce, as traders weighed the Federal Reserve’s interest-rate path and prospects for a deal to reopen the Strait of Hormuz.
The metal remained on track for a second weekly gain despite pulling back Thursday from a 10-week high. A subdued US inflation print suggested the impact of energy-price shocks from the Iran war faded in July, reducing pressure on the Fed to pursue a more aggressive monetary policy.
Money markets are pricing in a roughly one-in-three chance of a September rate hike. Before the Fed meets again next month, additional reports on employment are due and investors will be watching Chairman Kevin Warsh’s remarks at the central bank’s annual Jackson Hole symposium later in August.
While the prospect of no rate hike is generally positive for non-yielding gold, rates that stay elevated for an extended period could weigh on bullion by making bonds more attractive. Meanwhile, any flare-ups in the Middle East risk a return to the higher energy prices that have underpinned inflationary risks since the US-Iran war began in late February.
Gold’s recovery above the key $4,000-an-ounce threshold in recent weeks has been driven by renewed investor appetite and an increase in central bank purchases, notably from China. Gains earlier this week took the metal above its 100-day moving average for the first time since April, although it has since returned below the threshold.
“The macro setup has turned more constructive, although positioning is less supportive and technical momentum is starting to look stretched after the recent rebound,” Christopher Wong, a strategist at Oversea-Chinese Banking Corp., said in a note. “Consolidation risks remain around current levels,” he added.
Spot gold edged up 0.2% to $4,359.73 an ounce at 7:22 a.m. in Singapore, after shedding 1.3% on Thursday. Silver was little changed at $64.55 an ounce. Platinum and palladium were also flat, while the Bloomberg Dollar Spot Index, a gauge of the US currency, fell marginally.
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