Gold slips from over two-month peak as investors cash in on rally

The U.S. consumer price index rose 3.4% in the 12 months through July, down from 3.5% in June and in line with economists' expectations. The data marked a second consecutive month of cooling annual inflation.

Markets are now pricing a 36% chance of a rate hike at the Fed's September meeting, down from about 55% a week earlier, according to the CME FedWatch Tool.

Focus is now shifting to the Producer Price Index, due later on Thursday, for further clues on price pressures and the Fed's policy outlook.

Lower interest rates tend to support gold, which does not pay interest, by reducing the opportunity cost of holding bullion.

Gold prices slipped on Thursday after rising to a more than two-month high, as investors took profits following U.S. inflation data that sharply reduced expectations for a Federal Reserve rate hike next month.

Spot gold XAU= fell 0.3% to $4,395.04 per ounce by 1116 GMT, after climbing about 1% earlier in the session to its highest since June 5. U.S. gold futures GCcv1 for December delivery fell 0.3% to $4,452.70 per ounce.

Further upside in precious metals will likely depend on whether incoming U.S. data keep the Fed repricing intact and whether ETF accumulation continues to build, said OBCB Group Research in a note.

Despite setbacks, gold is keen to resume its bull run, but that rally is on hold for now as geopolitics currently favour the dollar as the go-to safe haven, Norman said.

Bank of Korea held a $250 million stake in US-listed gold ETF as of end-June, a SEC filing showed.