Gold held above $4,400 an ounce on Wednesday, near a two-month high, as traders awaited the U.S. July inflation report and weighed conflicting signals over efforts to reopen the Strait of Hormuz. China's central bank added to its gold reserves for a 21st straight month, while analysts flagged technical resistance near $4,460.
Hormuz doubts keep bullion supported
Spot gold rose 1.0% to $4,413.34 an ounce at 07:14 ET, while gold futures gained 0.7% to $4,472.67 an ounce. Pakistan's defense minister said Washington and Tehran were close to an arrangement on the strait, while reports of advanced Oman-Iran discussions suggested diplomacy was still moving forward. Iran, however, has insisted the waterway will remain closed until the U.S. lifts its blockade on Iranian ports and compensates for damage from U.S. military strikes.
The mixed signals kept energy markets volatile. The U.S. and Yemen's Iran-aligned Houthis reported separate attacks on shipping in the Strait of Hormuz and Bab el-Mandeb, and a U.S. Navy helicopter fired missiles at a Panama-flagged cargo vessel attempting to transit the Gulf of Oman. A drone attack also targeted a refinery in Libya.
CPI print looms over the Fed's rate path
Investors now await Wednesday's U.S. consumer price index, followed by producer prices on Thursday. Economists expect the index to rise at a slower annual rate of 3.4% in July, compared with June's 3.5% increase, and climb 0.1% month over month. A hotter-than-expected print could strengthen the case for a Fed rate hike in September, while a softer reading could give the Fed room to hold steady.
As a result, markets have held back from aggressive positioning ahead of the release, with swaps pricing the odds of a quarter-point September hike at roughly 50-50. For gold, higher energy prices could also encourage the Fed to keep rates elevated for longer, raising the opportunity cost of holding non-yielding bullion.
China's central bank keeps buying
The People's Bank of China increased its gold reserves for a 21st consecutive month in July, adding about 640,000 troy ounces to reach 76.08 million ounces. Gold-backed Chinese ETFs have also continued to attract buyers, reinforcing the stronger institutional demand seen in recent weeks.
Tony Sycamore, senior market analyst at IG, said gold's retreat from $4,435 reflected profit-taking ahead of the CPI report, hawkish Federal Reserve commentary and renewed strength in energy prices. He said gold now faces downtrend resistance around $4,460, drawn from the late-January record high near $5,602, with the 200-day moving average around $4,495 reinforcing that ceiling. Bullion needs a sustained break above both levels to open the way toward $5,000.
Sources: Commodities & Futures News, Yahoo Personal Finance
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