Gold prices recovered on Thursday after briefly sliding to their lowest level in six months, as traders covered bearish positions and waited for fresh US inflation data that could shape expectations for the Federal Reserve’s next move.
Spot gold rose 0.4% to $4,089.12 an ounce by 0215 GMT, after earlier touching $4,022.09, its weakest level since November 21.
US gold futures for August delivery slipped 0.5% to $4,111.10, suggesting investors were still cautious despite the rebound in the spot market.
The move came after bullion came under heavy pressure in recent sessions, with stronger inflation signals and rising rate expectations reducing the appeal of the non-yielding metal.
The $4,000 level has emerged as a key psychological support area for bullion, giving traders a reason to lock in profits after the recent decline.
The analysts said the sharp move towards $4,000 had created the conditions for a near-term bounce, either through short-covering by bearish traders or fresh buying from investors waiting on the sidelines.
They added that the dollar index had not gained much ground after Wednesday’s consumer inflation report, leaving room for gold to stabilise unless the producer price data delivers an unexpectedly strong reading.
That weaker dollar response helped limit the pressure on bullion.
A stronger greenback typically makes gold more expensive for buyers using other currencies, while higher bond yields can reduce demand for an asset that pays no income.
Markets are now focused on the May US Producer Price Index report, due later in the day, for further evidence on whether inflation pressures are broadening.
The latest Consumer Price Index data showed US inflation rising at its fastest pace in three years in May, driven in part by surging energy costs linked to the Middle East conflict.
The data reinforced expectations that the Federal Reserve may need to keep policy tighter for longer.
Traders are now pricing in a more than 70% chance of a US rate hike by December, according to the CME FedWatch tool.
That shift in expectations has kept pressure on gold, despite its traditional role as a hedge against inflation.
The tension for bullion is clear. Inflation can support demand for gold as a store of value, but higher interest rates tend to work in the opposite direction by boosting the returns available from cash and bonds.
Geopolitical risks also remained firmly in focus after the US military said it had launched a fresh round of strikes on multiple targets in Iran.
The action came hours after President Donald Trump warned that further attacks would follow if no peace deal was reached.
Iran responded by declaring the closure of the Strait of Hormuz, one of the world’s most important oil-shipping routes.
Oil prices climbed more than $2 on Thursday, raising concerns that a further energy shock could feed into inflation and complicate the policy outlook for central banks.
The rise in crude offered some support to gold by lifting inflation and geopolitical risk premiums, though the metal’s gains remained modest as rate concerns capped momentum.
Among other precious metals, spot silver rose 0.3% to $63.86 an ounce, platinum gained 0.6% to $1,673.75, and palladium advanced 2.2% to $1,239.89.
