Gold consolidates gains, set for highest close in two months

Gold rose for the third day in a row and is about to post the highest close since June 6, as it hovers around $1,285/oz (up 0.60%) amid risk aversion, soft US inflation data, and a weak US dollar. 

The Dow Jones is falling 0.60% and reached the lowest level in 10 days. In Europe, stock markets finished with losses between 0.50% and 1.40%. The risk-off environment continues to boost the demand for safe-haven assets, including bonds, the yen and gold. 

Today’s economic data from the US showed an unexpected decline in July of the Producer Price Index, that fell 0.1%, against expectations of a 0.1% rise. It was the first negative reading for the index in almost a year. The data goes in the opposite direction of another rate hike from the Federal Reserve during 2017. 

US: Despite soft PPI, fundamentals point to firm inflation ahead - Wells Fargo

On Friday, the key report will be the US Consumer Price Index, that is expected to show an increase of 0.2% in July and 1.8% y/y.  Another reading below expectations could add pressure to the US dollar and could favor the upside in gold.

XAU/USD Levels to watch

The yellow metal peaked today at $1,287, that could be seen now as the immediate resistance. Above the next levels to watch might lie at $1,290 followed by 2017 highs at $1,296 and then, the $1,300 handle. On the downside, immediate support might lie at $1,283 (US session low), $1,278 (Aug 9 high) and $1,274 (Aug 10 low).