Gold firms on Fed pause hopes after US inflation data

By Brijesh Patel

(Reuters) - Gold prices ticked up on Thursday after data showed U.S. consumer prices increased moderately in July, cementing expectations the Federal Reserve is at the end of its rate hike cycle.

Spot gold was up 0.1% at $1,915.49 per ounce by 1:51 p.m. EDT (1751 GMT), after rising as much as 0.8% following the release of the U.S. data.

U.S. gold futures settled 0.1% lower at $1,948.9.

The consumer price index (CPI) rose 0.2% last month, matching the increase in June, the U.S. Labor Department said. The CPI advanced 3.2% in the 12 months through July, up from a 3.0% rise in June, which was the smallest year-on-year gain since March 2021.

"With CPI continuing to slowly tick lower, that portends less likelihood of the Fed's need to continue to raise interest rates, particularly at the September meeting," said David Meger, director of metals trading at High Ridge Futures.

"As a result, we've seen the dollar retrace and yields pull back and that's a better underlying environment for the gold market."

Following the data, the dollar eased against its rivals, making gold more attractive for other currency holders. However, benchmark U.S. 10-year bond yields rose in choppy session, keeping gold gains in check. [US/] [USD/]

According to the CME's FedWatch Tool, the probability the Fed leaves rates unchanged at its September meeting is now at 90.5% from around 86.5% prior to the data.

Gold is highly sensitive to rising U.S. interest rates, as they increase the opportunity cost of holding non-yielding bullion.

A separate report from the Labor Department showed initial claims for state unemployment benefits increased 21,000 to a seasonally adjusted 248,000 for the week ended Aug. 5.

Elsewhere, silver gained 0.2% to $22.72 per ounce, platinum rose 2.2% to $908.21 and palladium jumped 4.5% to $1,290.94.

(Reporting by Brijesh Patel and Deep Vakil in Bengaluru; Editing by Krishna Chandra Eluri)