Gold rebounds after softer US producer inflation data eases rate concerns

The gold market regained momentum on Wednesday after weaker-than-expected US wholesale inflation data boosted investor sentiment and eased expectations of aggressive US monetary policy tightening.

Gold prices rebounded from earlier losses and traded around $4,070 per ounce following the inflation report.

Data released by the US Labour Department showed the Producer Price Index (PPI) fell 0.3% in June, reversing May's downwardly revised 0.6% increase.

The reading came in below economists' expectations, who had forecast producer prices to remain unchanged during the month.

Earlier rally fades as geopolitical concerns return

Earlier on Wednesday, gold traded lower, as investors reassessed the broader inflation outlook.

The market's initial optimism after softer US consumer inflation data gave way to concerns that renewed geopolitical tensions in the Middle East could drive energy prices higher and keep inflationary pressures elevated.

Earlier in the day, spot bullion fell 0.5% to $4,035.67 an ounce by 0300 GMT, while August gold futures declined 0.7% to $4,042.20.

The losses partially reversed Tuesday's strong rally of more than 2%, during which spot gold climbed to $4,100.49 after June consumer inflation data came in below expectations.

Wholesale inflation cools more than expected

The report also showed that core producer prices, which exclude volatile food and energy costs, increased 0.2% in June following May's downwardly revised 0.1% increase.

Over the past year, core PPI advanced 5.1%.

The softer inflation readings encouraged buying interest in the precious metals market.

Spot gold was last trading at $4,064.90 an ounce, up 0.33% on the day.

The improved performance reflected growing optimism among investors as cooling inflation prompted markets to scale back expectations for an aggressive US monetary policy path.

On an annual basis, wholesale inflation rose 5.5% over the past 12 months, below consensus estimates of 6.2%, the report showed.

The market is caught between inflation relief and oil price risks

The gold market is now balancing two competing themes.

On one hand, softer-than-expected inflation data has eased immediate concerns over higher interest rates, improving sentiment toward bullion.

On the other hand, investors remain cautious that renewed fighting in the Middle East could push oil prices higher, potentially reigniting inflationary pressures.

This combination has created mixed trading conditions for gold, with investors weighing the supportive impact of cooling inflation against the possibility of another energy-driven price shock.

Silver prices also moved lower on Wednesday.

The decline came as escalating geopolitical tensions in the Middle East weighed on investor sentiment, offsetting support from a weaker US dollar following the softer-than-expected US inflation data.

While weaker inflation generally provided support to precious metals by reducing expectations for aggressive monetary policy, geopolitical uncertainty continued to influence broader market positioning, leaving both gold and silver caught between improving inflation trends and renewed concerns over energy-driven price pressures.