Gold Steadies Near $4,000 as Inflation Data Eases Rate-Hike Bets

Gold steadied near $4,000 an ounce on Friday as a softer-than-expected US inflation reading tempered expectations for a Federal Reserve rate hike, capping a volatile week for bullion. The metal has been underpinned by sustained central bank buying, which has added over 1,000 tonnes to official reserves since 2022, and by safe-haven demand amid geopolitical tensions. The inverse correlation with the US dollar index (DXY) also supported gold, as the dollar eased on the inflation data.

Spot gold was little changed in early trading, having clawed back 0.7% in the previous session. The US personal consumption expenditures (PCE) price index, the Fed's preferred inflation gauge, rose by a less-than-expected 0.4% in May, causing Treasury yields to dip. This relieved some pressure on gold, which had slumped to its lowest since November earlier in the week amid fears of aggressive Fed tightening. For precious metals traders, the inflation data reduces the likelihood of a near-term rate hike, which is positive for gold as higher rates increase the opportunity cost of holding non-yielding assets. Real yields, which move inversely to gold prices, also eased. The COMEX-LBMA spread narrowed, indicating improved market liquidity. ETF flows into GLD and IAU have been mixed, with some investors adding to positions on dips. Jewelry demand remains steady in key markets like India and China, while investment demand is supported by central bank purchases.

Looking ahead, markets will focus on further economic data, including the June jobs report and consumer sentiment surveys, for clues on the Fed's next move. Any signs of persistent inflation could reignite rate-hike bets, while a continued slowdown may support gold. Key support remains near $3,900, with resistance at $4,050. Traders should monitor real US 10-year yields, which have a strong negative correlation with gold prices, and the DXY for directional cues.