Gold Hits Three-Month High as Investors Await US Inflation Data

Gold climbed to its highest level in more than three months on Tuesday, supported by a weaker US dollar, stronger Chinese demand and expectations that the Federal Reserve may have less reason to raise interest rates.

Spot gold briefly reached $4,696.18 an ounce, its highest level since May 14, before giving back some gains to trade around $4,647. US gold futures settled slightly lower at $4,694.50.

Part of the recent rally followed the US Treasury’s decision to double the size of liquidity-supporting buybacks for longer-term government bonds. The move contributed to dollar weakness, with the US currency recently falling to its lowest level in more than three months. A weaker dollar generally makes gold more attractive to international buyers.

Investors are now focused on US PCE inflation data, the Federal Reserve’s preferred inflation measure, as well as Fed Chair Kevin Warsh’s Jackson Hole speech on Friday. Softer consumer and producer inflation readings have already reduced expectations for another near-term rate increase. Traders were pricing in only a 38% chance of a September hike.

Demand from China is also providing support. China’s net gold imports through Hong Kong increased about 11% in July from the previous month, helped by stronger investment demand. Meanwhile, renewed tensions between the US and Iran continue to support gold’s appeal as a safe-haven asset.

Investor takeaway: Gold’s move toward the psychologically important $4,700 level shows that demand remains strong, but the next direction could depend heavily on US inflation and the Fed. Softer inflation and lower rate expectations would generally support gold, while a more hawkish Fed could slow the rally.

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