Gold Prices Slip From 10-Week High as Fed and Hormuz Risks Shape Outlook

Gold prices moved lower on Friday after pulling back from a 10-week high, as investors assessed softer U.S. inflation data, the Federal Reserve’s interest rate outlook and uncertainty surrounding the Strait of Hormuz.

Spot gold fell 0.4% to $4,335.56 an ounce, while gold futures declined 0.7% to $4,391.34. Silver dropped 0.6% to $64.09 an ounce and platinum lost 0.5% to $1,710.58. Meanwhile, the U.S. Dollar Index slipped around 0.1% to 99.90.

Despite Friday’s weakness, gold remained on course for a second consecutive weekly gain. Bullion has benefited from expectations that the Federal Reserve may keep interest rates unchanged in September following encouraging U.S. inflation readings.

July producer price data strengthened that outlook. Headline PPI was unchanged from the previous month, while core PPI increased 0.2%, with both figures coming in below market forecasts. The report followed relatively contained consumer inflation data earlier in the week.

Money markets currently indicate roughly a one-in-three chance of a September Fed rate hike. Investors will now focus on upcoming U.S. employment and inflation figures, as well as Federal Reserve Chair Kevin Warsh’s remarks at the Jackson Hole symposium later this month.

A less aggressive Fed policy outlook typically supports gold because the precious metal does not pay interest. However, profit-taking has weighed on prices following the recent rally, particularly after gold briefly climbed above its 100-day moving average.

Middle East developments remain another major factor for the gold market. Investors are closely following U.S. and Iranian efforts to end the conflict and reopen the Strait of Hormuz. A renewed escalation could drive oil prices higher, reignite inflation concerns and increase pressure on the Fed to tighten monetary policy.

A sustained reopening of the key shipping route, however, could ease energy supply pressures and reduce inflation risks.

Gold has also received support from renewed investor demand and stronger central-bank purchases, particularly from China. Still, with geopolitical uncertainty elevated and positioning stretched after the recent rebound, gold prices could face further consolidation before establishing their next direction.