Gold inches up as US dollar falls to lowest level in over 1 year

Gold prices rose sharply at settlement today, July 12, with the US dollar slipping to its lowest level in more than a year after US data indicated a slowdown in inflation, reflecting the minimized need for the Federal Reserve to tighten long-term monetary policy.

On an annual basis, the Consumer Price Index (CPI), which measures a broad swath of prices for goods and services, slowed to 3% in June — the slowest inflation rate since March 2021 — from the 4% recorded in May.

The yield on two-year US Treasury bonds plunged by nearly 12 basis points (bps) to 4.750%, while the yield on 10-year debt fell by 11 bps to 3.861%.

Markets are now pricing in an almost 92.4% chance that the US central bank may lift key rates by 25 bps at the Fed July 25-26 meeting. Forecasts are also growing for a stable monetary policy at the 5.25-5.50% range during the remaining three meetings this year, according to the CME FedWatch Tool.

June data on the US Producer Price Index (PPI), another measure of inflation, is scheduled for release on July 13, providing insights into the Fed's decision at its upcoming July meeting.

Bullion for August delivery surged 1.25%, or $24.60, to finish at $1,961.70 an ounce.

On the other hand, the US dollar index, which gauges the greenback's strength against a basket of six currencies, edged 1.10% lower to 100.61 points at 08:32 Makkah time, after touching 100.55 points in early trading.