Gold Prices Slip as Oil Rally Revives Inflation Concerns and Clouds Fed Outlook
Gold prices edged lower on Thursday as investors reassessed the inflation outlook following another surge in crude oil prices. Rising energy costs have renewed concerns that inflationary pressures could persist, complicating the Federal Reserve's policy path despite softer-than-expected U.S. consumer inflation data released earlier this week.
Gold Declines as Investors Shift Focus to Inflation Risks
As of 1:15 PM WIB, spot gold (XAU/USD) fell 0.6% to $4,028.43 per troy ounce, while Gold Futures slipped 0.8% to $4,035.50. Meanwhile, silver (XAG/USD) dropped 0.5% to $58.35 per ounce, and platinum (XPT/USD) eased 0.1% to $1,629.89 per ounce.
The pullback follows a strong rally earlier in the week, when gold climbed more than 2% after weaker-than-expected U.S. inflation data fueled expectations that the Federal Reserve may adopt a less aggressive monetary stance.
Softer U.S. Inflation Supports Gold, but Rising Oil Prices Offset Optimism
June's U.S. Consumer Price Index (CPI) recorded the first monthly decline in consumer prices since 2020, easing inflation concerns and pushing Treasury yields and the U.S. dollar lower. The softer inflation report prompted traders to reduce expectations of near-term Federal Reserve interest rate hikes, providing significant support for precious metals.
However, market sentiment quickly shifted as crude oil prices resumed their upward momentum. Investors are increasingly concerned that higher energy costs could reignite inflationary pressures, forcing the Federal Reserve to maintain higher interest rates for longer than previously anticipated.
Oil Rally Keeps Federal Reserve Policy in the Spotlight
Crude oil prices extended gains for a third consecutive session after President Donald Trump maintained a naval blockade around Iranian ports and warned of further military escalation unless Tehran returned to negotiations. The heightened geopolitical tensions have intensified concerns over global energy supplies, driving oil prices higher.
Persistently elevated energy prices could complicate the Federal Reserve's efforts to bring inflation back to its long-term target. While gold is traditionally viewed as a hedge against inflation and geopolitical uncertainty, higher interest rates and stronger bond yields typically reduce the appeal of non-yielding assets such as gold.
Federal Reserve officials have welcomed the recent moderation in inflation but continue to emphasize that additional evidence is needed before they can confidently conclude that inflation is moving sustainably toward the central bank's target.
ANZ Sees Limited Near-Term Upside for Gold
Analysts at ANZ expect gold prices to remain range-bound in the short term as expectations for at least one Federal Reserve rate hike this year continue to cap upside momentum. Nevertheless, they believe buying interest is likely to re-emerge during deeper price corrections, arguing that the precious metal's long-term fundamentals remain firmly supportive.
Markets Await U.S. Producer Price Data
Investors are now turning their attention to the upcoming U.S. Producer Price Index (PPI) report, which could provide fresh insights into inflation trends and the Federal Reserve's next policy move.
According to the CME FedWatch Tool, markets currently assign a 58% probability of a Federal Reserve interest rate hike in September, down from approximately 76% before Tuesday's softer CPI report, highlighting the market's evolving expectations for U.S. monetary policy.