Gold at 1-month peak as Fed rate-hike fears ease, dollar slips

Gold

Gold prices on Thursday fluttered around their highest level in nearly a month, helped by a weaker dollar and expectations that the U.S. Federal Reserve is soon nearing an end to its rate-hike cycle.

Spot gold was up 0.2% at $1,960.20 per ounce by 10:18 a.m. EDT (1418 GMT), its highest since June 16. U.S. gold futures rose 0.1% to $1,963.

The dollar index fell to its lowest in more than a year, making gold more affordable to overseas buyers. Benchmark U.S. yields were also at their lowest in more than a week, cutting the opportunity cost of holding non-yielding gold. [US/][USD/]

"After yesterday's data, we saw a strong rally in the gold market. Gold has a good shot, if it can get another catalyst to push up to the $2,000 mark, but we are chewing through a lot of different resistance points," said Phillip Streible, chief market strategist at Blue Line Futures in Chicago.

Data on Thursday showed U.S. producer prices barely rose in June, providing more evidence that the economy had entered a disinflation phase.

This comes a day after data showed that U.S. consumer prices rose modestly in June, registering their smallest annual increase in more than two years as inflation continued to subside.

"The market has scaled back its expectations for a second hike. In line with this correction, the gold price has recovered," Commerzbank wrote in a note.

Interest rate futures showed markets mostly priced in another rate hike from the Federal Open Market Committee (FOMC) later this month, but expectations of further increases have dropped.

Higher interest rates increase the opportunity cost of holding non-yielding bullion.

Meanwhile, the number of Americans filing new claims for unemployment benefits unexpectedly fell last week, indicating that the labour market remains tight.

Spot silver rose 2% to $24.61 per ounce, platinum was up 2.7% to $971.75, and palladium gained 0.9% to $1,294.22.