Gold is back near two-month highs: can PPI trigger a $4,500 breakout?

Gold steadied near a two-month high on Thursday as investors paused after a four-session rally and waited for US producer-price data to confirm whether inflation is cooling enough to keep the Federal Reserve on hold in September.

Spot gold was little changed around $4,409 an ounce in early trade after briefly rising about 1% to its highest level since June 5.

December US futures hovered near $4,467. The metal has gained sharply since the start of August, helped by softer labour-market data, a weaker rate outlook and renewed investment demand.

Post-CPI rally pauses before the next inflation test

Wednesday’s consumer-price report gave gold bulls another reason to stay engaged. US CPI rose 0.1% in July and 3.4% from a year earlier, down from 3.5% in June.

Core inflation increased 0.2% on the month and eased to 2.5% annually.

The details were also relatively benign. Shelter rose only 0.1% and energy prices fell 1.5% during July, helping keep the monthly headline increase contained.

That pushed the market-implied probability of a September rate increase to about 40%, down from roughly 54% a week earlier.

Lower expected rates tend to support bullion because they reduce the opportunity cost of holding an asset that pays no interest.

KCM Trade analyst Tim Waterer sees Thursday’s pause as consolidation after the CPI-driven advance rather than a reversal in sentiment.

His assessment is that traders want confirmation from producer prices before adding aggressively to the move.

PPI could decide whether gold challenges $4,500

The Bureau of Labor Statistics will release July producer prices at 8.30 am ET on Thursday. June PPI fell 0.3% from the previous month but was still up 5.5% from a year earlier.

A softer July reading would reinforce the idea that pipeline inflation is easing and could further weaken expectations for a September Fed increase.

A stronger number would complicate the trade by potentially pushing Treasury yields and the dollar higher.

Technical momentum is also becoming more important after gold’s rapid rebound.

Saxo Bank analysts see the 200-day moving average near $4,500 as the next major hurdle after bullion cleared the $4,200 area.

Gold-backed ETF holdings have also increased for five consecutive sessions to a six-week high, pointing to renewed investor demand rather than a rally driven solely by short-covering.

Geopolitics keeps a floor under bullion

The rate story is not gold’s only source of support. US-Iran negotiations remain stalled, keeping demand for defensive assets elevated even after the inflation-driven rally.

The same geopolitical tension can cut both ways.

If disruption pushes energy prices significantly higher, renewed inflation pressure could eventually strengthen the case for tighter monetary policy.

For now, the balance remains favourable. Comex gold settled Wednesday at $4,408.90, its fourth consecutive gain and highest close since June 4.

The next question is whether PPI validates the CPI signal. If it does, a sustained break above $4,500 would become a more credible target rather than merely a technical possibility.