Gold rebounds towards 10-week high as markets await US inflation data

Gold prices rose on Wednesday as traders reduced their expectations of a US Federal Reserve rate hike next month, while investors awaited key inflation data that could influence the central bank's policy outlook.

Spot gold gained 0.6% to $4,391.82 per ounce by 0535 GMT, while US gold futures for December delivery rose 0.2% to $4,451.90.

Bullion reached a 10-week high on Tuesday before facing resistance around $4,387, its 100-day moving average, and ended the session lower for the second time this month.

“The primary driver for gold is the reduction in pricing of rate hikes by the Fed,” said Kelvin Wong, a senior market analyst at Oanda.

Gold recorded its biggest weekly gain since January on Friday after weaker-than-expected US jobs data led traders to reduce their expectations of higher interest rates.

According to the CME FedWatch Tool, traders are now pricing in a 50% chance of a rate hike in September, down from 60% before the jobs report.

Lower interest rates tend to support gold prices because the precious metal does not pay interest.

Investors are now awaiting the US Consumer Price Index data due later on Wednesday, which could influence expectations for the Fed's next policy decision.

Fed Bank of Chicago President Austan Goolsbee said he was more concerned about inflation remaining too high than weakness in the labour market.