Gold on Track for First Monthly Gain in Five Months Despite Minor Pullback

Gold prices edged lower in Asian trading on Friday but remained on course for their first monthly advance since February, supported by a weaker U.S. dollar and recent data suggesting a slight moderation in inflation.

According to data from Investing.com, spot gold fell 0.3% to $4,089.63 an ounce, while gold futures dipped 0.2% to $4,090.70 an ounce. Despite the minor pullback, bullion is on track to end July with a gain of approximately 2.1%, breaking a four-month losing streak for the precious metal.

Fed Policy and Inflation in Focus

Investor sentiment was aided by a softer-than-expected U.S. core Personal Consumption Expenditures (PCE) price index reading for June, which was released on Thursday. This report, the Federal Reserve's preferred inflation gauge, helped temper some concerns about the immediate need for further interest rate hikes.

Earlier in the week, the Federal Reserve left interest rates unchanged, as markets had widely anticipated. However, Fed Chair Kevin Warsh declined to provide clear cues on the central bank's future plans, and the decision was reportedly not unanimous, with at least three policymakers calling for higher rates. While the inflation data showed moderation, the core PCE index remains well above the Fed's 2% annual target, and markets are still pricing in at least one more rate hike this year, a factor that could cap gold's upside.

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Weaker Dollar Lifts Broader Commodities

A softer U.S. dollar provided a significant tailwind for commodities, making them more affordable for holders of other currencies. The dollar weakened amid reports of Japanese intervention in currency markets.

This dynamic supported other precious and industrial metals:

• Platinum was a notable outperformer, on track for a 5.2% jump in July.
• Silver lagged, trading flat for the month but up 0.8% for the week.
• Copper futures were set to add over 3% for the month, bolstered by the weaker dollar and bets on tighter supplies.