Gold scales 1-month peak as dollar, yields drop on rate-hike pause hopes

July 13 (Reuters) – Gold prices hovered near 1-month highs on Thursday as the dollar and Treasury yields fell on expectations the US Federal Reserve could end its rate-hike cycle soon.

Spot gold was up 0.1% at USD 1,958.79 per ounce by 01:41 p.m. EDT (1741 GMT), after hitting its highest since June 16. US gold futures rose 0.1% to USD 1,963.80.

The dollar index fell to its lowest in more than a year, making gold more affordable to overseas buyers, while benchmark US Treasury yields fell, cutting the opportunity cost of holding non-yielding bullion.

“After yesterday’s data, we saw a strong rally in the gold market. Gold has a good shot, if it can get another catalyst to push up to the USD 2,000 mark, but we are chewing through a lot of different resistance points,” said Phillip Streible, chief market strategist at Blue Line Futures in Chicago.

Data on Thursday showed US producer prices barely rose in June, providing more evidence that the economy had entered a disinflation phase.

This comes a day after data showed that US consumer prices rose modestly in June, registering their smallest annual increase in more than two years.

“The market has scaled back its expectations for a second hike. In line with this correction, the gold price has recovered,” Commerzbank wrote in a note.

Interest rate futures showed markets mostly priced in another rate hike from the Federal Open Market Committee (FOMC) later this month, but expectations of further increases have dropped.

Higher interest rates increase the opportunity cost of holding non-yielding bullion.

Meanwhile, the number of Americans filing new claims for unemployment benefits unexpectedly fell last week, indicating that the labor market remained tight.

Spot silver rose 2.4% to USD 24.73 per ounce, platinum was up 2.9% at USD 973.74 and palladium climbed 1.1% to USD 1,296.30.

(Reporting by Ashitha Shivaprasad and Ananya Bajpai in Bengaluru; Editing by Maju Samuel and Vinay Dwivedi)