Gold prices dropped more than 1% in Thursday's trading (Aug 13) as investors engaged in profit-taking following a rally to a more than two-month high. Spot gold weakened by approximately 1.2% to US$4,354.58 per troy ounce, having previously touched US$4,449.39.

Selling pressure intensified when gold once again failed to approach the psychological US$4,500 level. This level is viewed as a strong resistance point after several attempts to rise failed to hold, prompting traders to lock in gains following a sharp rally over recent sessions.

On the fundamental front, US Producer Price Index (PPI) data for July remained unchanged month-on-month, as a decline in goods prices offset rising service costs. This data followed the Consumer Price Index (CPI) report, which showed annual inflation easing to 3.4% from 3.5% in June, thereby reducing pressure on the Federal Reserve to raise interest rates in September.

Markets now estimate the probability of

Markets now estimate the probability of a September rate hike at around 35%, down from approximately 40% immediately after the PPI data was released. Nevertheless, some Fed officials maintain a hawkish stance; notably, Cleveland Fed President Beth Hammack reiterated her view that an interest rate hike remains necessary.

The correction in gold prices also follows a surge of about 9% in a single week, driven by buying from Chinese and retail investors. These conditions amplified profit-taking as gold approached key moving averages and the US$4,500 resistance level. Silver, platinum, and palladium also declined.

Newsmaker Analysis: The current drop in gold prices reflects profit-taking following a sharp rally rather than a shift in fundamentals toward a bearish outlook. Relatively contained CPI and PPI figures, along with the diminishing likelihood of a Fed rate hike, continue to support gold. However, the failure to break through the US$4,450–US$4,500 range indicates that resistance remains strong. If selling pressure persists, gold risks testing the US$4,350 and US$4,300 levels before attempting to regain upward momentum.