Gold rose to a more than two-month high on Wednesday after a U.S. inflation reading matched expectations, bolstering bets that the Federal Reserve will keep rates on hold in September.
Spot gold rose 0.9% to $4,406.64 per ounce by 1:30 p.m. EDT (1730 GMT), and climbed above the 100-day moving average, which is currently at $4,387.22. Bullion climbed more than 1% to its highest level since June 5 earlier in the session.
U.S. gold futures settled 0.6% higher at $4,467.5.
U.S. consumer inflation increased slightly in July, potentially weakening the argument for an interest rate hike from the Fed next month. It edged up 0.1% last month, on par with estimates, after dropping 0.4% in June.
"The CPI data has been encouraging. It was higher than last month, but it was in line with estimates, along with a weaker dollar and technicals which have all helped gold piggyback on it," Marex analyst Edward Meir said.
Traders are now pricing in about a 40% chance of an interest rate hike at the Fed's September meeting, down from 46% before the inflation data, according to the CME FedWatch Tool. FEDWATCH/
The Fed, on July 29, left the benchmark policy rate unchanged in the 3.50% to 3.75% range, though three of 12 voting policymakers dissented, favoring a rate hike instead.
A higher interest rate environment tends to reduce the appeal of non-yielding gold.
Attention now shifts to the Producer Price Index (PPI), due on Thursday.
Meanwhile, the U.S. and Yemen's Iran-aligned Houthis reported separate attacks on shipping on Tuesday as prospects for ending the Iran war appeared to dim.
"A resumption of the hostilities can make oil move back up towards the $100 mark, in which case you could see interest rates move up and gold could struggle," Meir said.
Among other metals, spot silver rose 1.3% to $65.49 per ounce, having hit its highest level since June 22 earlier in the session.
Platinum rose 0.9% to $1,759.50, and palladium gained 0.5% to $1,367.23.
