Weekly Gold Decline Follows Surge in US Wholesale Prices

US wholesale inflation surged in July by the most in three years, dampening hopes for aggressive Federal Reserve rate cuts in September. The Producer Price Index (PPI) data showed inflation accelerating through the economy, even as consumer prices remained relatively stable. This split between wholesale and consumer inflation has created uncertainty about Fed policy, with traders now seeing only a 90% chance of a September rate cut, down from certainty earlier in the week. The data highlights ongoing tensions between President Trump’s push for lower rates and the Fed’s concerns about inflation risks from tariffs.

Gold prices rose slightly on Friday, supported by a weaker US dollar, but are still heading for a 1.7% weekly decline. The drop came after Thursday’s producer price data showed the biggest increase in three years, reducing expectations for a large Federal Reserve rate cut in September. While consumer price data earlier in the week had briefly raised hopes for a bigger rate cut, the hotter producer prices and lower-than-expected jobless claims have traders scaling back those expectations. Gold typically benefits from lower interest rates since it doesn’t yield any income.

Switzerland’s gold industry has firmly rejected Swatch CEO Nick Hayek’s proposal to impose a 39% export tax on gold bars shipped to the United States. Hayek suggested the retaliatory measure after President Trump imposed 39% tariffs on Swiss imports, though gold was later exempted. The Swiss Association of Manufacturers and Traders in Precious Metals warned that such an export tax would harm Switzerland economically and damage its reputation as a free trade advocate. Switzerland continues talks with U.S. officials to reduce the tariffs, which Trump justified by citing Switzerland’s trade surplus with America.

U.S. Treasury Secretary Scott Bessent criticized the Bank of Japan’s monetary policy stance, stating the central bank is “behind the curve” on inflation and needs to raise interest rates. In a Bloomberg TV interview, Bessent said Japan has an inflation problem with core inflation above 2% for over three years, and predicted the BOJ will be hiking rates soon. His comments contrast sharply with BOJ Governor Kazuo Ueda’s position that the bank isn’t moving too slowly. The remarks contributed to the yen strengthening against the dollar, with USD/JPY falling to three-week lows.

U.S. natural gas prices dropped below $2.9 per million British thermal units (mmBtu), reaching their lowest level since November 2024. The decline was driven by near-record production levels, high storage inventories, and expectations of milder weather ahead. August production in the lower 48 states averaged 108.3 billion cubic feet per day, up from July’s record of 107.9 Bcf/d. Despite a hotter-than-usual summer, abundant supply has allowed above-average storage injections, with stockpiles now about 6% above seasonal norms.