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Gold prices traded little changed on Wednesday after posting strong gains in the previous session, as weaker-than-expected U.S. inflation data supported demand for safe-haven assets while cautious comments from Federal Reserve Chair Kevin Warsh limited further upside.
Spot gold (XAU/USD) edged up 0.07% to $4,055.63 per ounce, while gold futures slipped 0.19% to $4,062.05. The precious metal remained near record levels as investors balanced easing inflation with ongoing geopolitical uncertainty and the Federal Reserve’s policy outlook.
Bullion rallied after U.S. consumer prices unexpectedly declined in June, marking the first monthly drop in inflation in six years. The softer inflation report boosted U.S. Treasury prices, weakened the U.S. dollar, and increased the appeal of non-yielding assets such as gold.
The latest inflation figures also prompted traders to significantly reduce expectations for another interest rate hike. According to CME FedWatch data, markets now see only a 16.6% probability of a 25-basis-point increase at the Fed’s July 28-29 meeting, down sharply from 41% a day earlier.
However, gains in gold were capped after Warsh reiterated that returning inflation to the Federal Reserve’s 2% target remains the central bank’s priority. His remarks signaled that policymakers remain prepared to tighten monetary policy again if inflationary pressures strengthen.
Meanwhile, geopolitical tensions in the Middle East continued to support demand for safe-haven assets while keeping investors alert to potential inflation risks. President Donald Trump withdrew a proposal to impose a 20% fee on cargo passing through the Strait of Hormuz, but the U.S. maintained its naval blockade of Iranian shipping and continued military operations targeting Iran’s capabilities.
Oil prices also remained elevated, with Brent crude holding above $85 per barrel and West Texas Intermediate (WTI) trading near $79. Higher energy prices could reignite inflation concerns if they persist.
Investors are now awaiting upcoming U.S. producer price index (PPI) data for additional clues on inflation trends and the Federal Reserve’s next policy move, factors that are expected to influence the near-term direction of gold prices.
