Gold falls but posts its strongest monthly performance since February

Gold prices declined during Friday's trading as the US dollar rebounded from its lowest level in more than a month. Despite the daily losses, the precious metal posted its first monthly gain in five months after softer US inflation data reinforced expectations that the Federal Reserve may slow the pace of future interest rate increases.

In trading, spot gold fell 1.8% to $4,027.75 per ounce after dropping as much as 2% earlier in the session, while US August gold futures declined 1.9% to $4,025.10 per ounce.

Despite Friday's pullback, gold gained about 0.5% during July, marking its strongest monthly performance since February as the conflict between the United States and Iran unfolded.

Slower inflation and Federal Reserve policy

Recent government data showed US inflation continued to moderate, prompting investors to scale back expectations for additional Federal Reserve interest rate hikes this year. The shift also came after oil prices retreated earlier in the month to levels seen before the outbreak of the conflict with Iran.

Data released on Thursday confirmed that US inflation slowed in June, although many investors believe the improvement could prove temporary given renewed tensions in the Middle East and the recent rebound in oil prices.

After leaving interest rates unchanged, Federal Reserve Chair Kevin Warsh reiterated this week that the central bank remains fully committed to bringing inflation lower but stopped short of signaling that another rate increase is imminent.

Meanwhile, the US Dollar Index rose about 0.5% after plunging roughly 2.4% on Thursday, its largest one-day decline since January 2023. The stronger dollar added pressure on gold by making the precious metal more expensive for holders of other currencies.

According to CME Group's FedWatch Tool, markets currently assign a 65% probability to a Federal Reserve interest rate increase in September, down from more than 80% a week earlier.

Other precious metals

Spot silver fell 2.9% to $57.29 per ounce, while platinum declined 2.5% to $1,618.97 per ounce. Palladium dropped 3.4% to $1,260 per ounce, although both platinum and palladium remain on track to finish the month with gains.