Gold Heads for Weekly Loss After Report Shows US Inflation Surge

Gold bars. Photographer: Chris Ratcliffe/Bloomberg

(Bloomberg) -- Gold headed for a weekly loss, after traders pared bets on the Federal Reserve cutting rates next month following a pick-up in inflation.

Bullion traded near $3,340 an ounce, after ending the previous session 0.6% lower following a report that showed US wholesale inflation accelerated in July by the most in three years. Bond yields and the dollar advanced after the data print, weighing on non-interest bearing gold as it is priced in the currency.

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Swap traders now see around a 90% chance the US central bank will reduce rates in September, after fully pricing in the move earlier this week. Bullion typically benefits in a lower-rate environment as it pays no interest.

The precious metal has climbed by more than a quarter this year, with the bulk of those gains occurring in the first four months. It has been supported by heightened geopolitical and trade tensions that have spurred haven demand, while central bank purchases have also underpinned its strength.

Traders will be monitoring a summit between the US and Russian presidents in Alaska later on Friday, which could have bearing on haven demand. Donald Trump warned he would impose “very severe consequences” if Vladimir Putin didn’t agree to a Ukrainian ceasefire agreement, following a call with European leaders ahead of his meeting with the Russian leader.

Last week, confusion over whether gold bars would be subject to US tariffs prompted a spike in the premium for futures in New York over the spot price in London. President Donald Trump said on Monday that there would not be a levy — causing the gap in the two markets to narrow — but formal clarification is still pending.

Spot gold was up 0.2% to $3,342.68 an ounce at 2:42 p.m. in Singapore, putting it on track for a 1.6% loss this week. The Bloomberg Dollar Spot Index was down 0.2%. Silver and palladium were flat, while platinum gained.

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