Gold retreats after hitting two-month peak

Gold fell more than 1 percent on Thursday as investors locked in gains after prices climbed to two-month highs following US inflation data that was in line with expectations, tempering expectations for a Federal Reserve rate hike next month.

Spot gold fell 1.2 percent to $4,354.58 per ounce by 12:58 a.m EDT (1658 GMT). Prices touched their highest level since June 5 earlier in the session at $4,449.39.

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US gold futures dipped 1.1 percent to settle at $4,420.40.

“4,500 is a big resistance point for gold. We touched it twice and gold tumbled from that point, with traders being jittery close to the 4,500-level at the moment,” said Bob Haberkorn, senior market strategist at StoneX.

The US Producer Price Index was unchanged in July as a decline in goods prices offset a rise in services costs, indicating that inflationary pressures may persist.

The data followed Wednesday’s consumer price report, which showed US inflation rose 3.4 percent in the 12 months through July, down from 3.5 percent in June and in line with economists’ expectations.

Markets are now pricing a 35 percent chance of a rate hike at the September meeting, down from 40 percent immediately after the PPI data, according to the CME FedWatch Tool.

Fed policymakers are unlikely to feel the urgency to raise rates next month after inflation cooled for a second consecutive month.

On Wednesday, however, Cleveland Fed President Beth Hammack reiterated the need to raise rates “right now”.

Lower interest rates reduce the opportunity cost of holding non-yielding bullion.

“(Gold) had a pretty solid 9 percent bump in a week behind Chinese and retail buying; seeing some profit-taking around 100 day moving average,” independent analyst Tai Wong said.

Meanwhile, oil prices declined on Thursday as investors assessed prospects for weaker global demand this year amid supply disruptions.

Separately, Bank of Korea held a $250 million stake in US-listed gold ETF as of end of June, an SEC filing showed.