Gold edged lower on Thursday, after touching a more than two-month high earlier in the session, as traders paused after a rally fueled by cooling US inflation, with attention turning to an upcoming producer price report for clues to prospects of near-term Federal Reserve rate hikes.
Spot gold fell 0.5% to $4,383.53 per ounce by 0601 GMT, after jumping about 1% to its highest since June 5. US gold futures for December delivery fell 0.6% at $4,440.80.
"Gold is in consolidation mode today after its post-CPI gains, with near-term expectations of a Fed rate hike being dialed back another notch," said Tim Waterer, chief market analyst at KCM Trade.
"Traders appear content to wait for confirmation from the upcoming PPI data before committing to the next leg higher."
Prices have risen over 8% so far this month, as traders scale back US interest rate hikes bets amid recent softer economic data.
On the geopolitical front, Iran and the US remain at loggerheads over efforts to agree on a permanent end to the war, according to a senior Iranian source, who said there had been no progress in talks to revive the interim deal agreed in June.
On monetary policy, Fed policymakers are likely to feel little fresh urgency to raise interest rates next month after data on Wednesday showed inflation cooled on a year-over-year basis for a second straight month.
The consumer price index rose 3.4% in the 12 months through July, down from 3.5% in June, in line with economists' expectations. Traders are now pricing in only a 40% chance of a hike at the September meeting, down from about 54% seen a week before, according to the CME FedWatch Tool.
Lower rates tend to support gold by lowering the opportunity cost of holding the non-yielding asset.
In other metals, spot silver lost about 0.3% to $65.09 per ounce, having climbed to its highest since June 22 in the previous session.
Platinum lost 0.8% at $1,741.96, and palladium fell 0.9% at $1,357.29.