Aug 12 (Reuters) – Gold rose to a more than two-month high on Wednesday after a U.S. inflation reading matched expectations, bolstering bets that the Federal Reserve will keep rates on hold in September.<\/p>\n
Spot gold rose 0.9% to $4,406.64 per ounce by 1:30 p.m. EDT (1730 GMT), and climbed above the 100-day moving average, which is currently at $4,387.22. Bullion climbed more than 1% to its highest level since June 5 earlier in the session.<\/p>\n
U.S. consumer inflation increased slightly in July, potentially weakening the argument for an interest rate hike from the Fed next month. It edged up 0.1% last month, on par with estimates, after dropping 0.4% in June.<\/p>\n
"The CPI data has been encouraging. It was higher than last month, but it was in line with estimates, along with a weaker dollar and technicals which have all helped gold piggyback on it," Marex analyst Edward Meir said. [USD\/]<\/p>\n
Traders are now pricing in about a 40% chance of an interest rate hike at the Fed's September meeting, down from 46% before the inflation data, according to the CME FedWatch Tool. [FEDWATCH\/]<\/p>\n
The Fed, on July 29, left the benchmark policy rate unchanged in the 3.50% to 3.75% range, though three of 12 voting policymakers dissented, favoring a rate hike instead.<\/p>\n
A higher interest rate environment tends to reduce the appeal of non-yielding gold.<\/p>\n
Attention now shifts to the Producer Price Index (PPI), due on Thursday.<\/p>\n
Meanwhile, the U.S. and Yemen's Iran-aligned Houthis reported separate attacks on shipping on Tuesday as prospects for ending the Iran war appeared to dim.<\/p>\n
"A resumption of the hostilities can make oil move back up towards the $100 mark, in which case you could see interest rates move up and gold could struggle," Meir said.<\/p>\n
Among other metals, spot silver rose 1.3% to $65.49 per ounce, having hit its highest level since June 22 earlier in the session.<\/p>\n
Platinum rose 0.9% to $1,759.50, and palladium gained 0.5% to $1,367.23.<\/p>\n
(Reporting by Sukanya Mitra in Bengaluru; Editing by Leroy Leo and Diti Pujara)<\/p>\n
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