Gold prices are expected to decline for the week on Friday (August 15th), as higher-than-expected US inflation data dampened expectations for a 50 basis point (bps) Fed rate cut in September.

Spot gold prices rose 0.1% to $3,339 per ounce at 02:44 GMT. Bullion prices have fallen 1.8% over the week. US gold futures for December delivery were flat at $3,384. "Gold is still grappling with the impact of the surge in PPI, which raises questions about how much the Fed is willing to cut rates this year," said Tim Waterer, chief market analyst at KCM Trade.

The US producer price index (PPI) rose 3.3% year-on-year in July, exceeding projections for a 2.5% increase, Labor Department data showed on Thursday. Weekly jobless claims came in lower than expected at 224,000, compared to the 228,000 forecast. Separately, US consumer prices rose only slightly in July, bolstering expectations of a Fed rate cut.

However, the higher-than-expected PPI figure dampened expectations of an aggressive easing cycle, making it less likely that the Fed will opt for a 50-bps rate cut at its next meeting. "If this surge in wholesale prices turns into a trend that then leads to a rise in the CPI, expectations for a US rate cut could be tempered, which could hamper gold's performance from a yield perspective," Waterer said.

St. Louis Fed President Alberto Musalem said a half-point rate cut in September was unnecessary, a day after Treasury Secretary Scott Bessent suggested one was possible.

Non-yielding gold thrives in a low-interest-rate environment. On the geopolitical front, investors are downplaying the chances of a major breakthrough on ending the war in Ukraine from Friday's meeting between Donald Trump and Vladimir Putin, despite some signs of progress.

Elsewhere, spot silver fell 0.2% to $37.91 an ounce, platinum fell 0.2% to $1,354.94, and palladium fell 0.3% to $1,142.51.(alg)

Source: Reuters