Gold is experiencing a slight decline after a vigorous rise yesterday and is consolidating near $1,955.

As of 17:10 UTC+3, the price of August gold futures on the Comex exchange has dropped by 0.44% to $1,955.25 per ounce. By that time, September silver futures had also declined by 0.24% to $24.82 per ounce.

Yesterday, the XAU/USD pair reached a new record high since June 16, hitting the level of $1,963. At the end of the trading week, the market is experiencing a corrective decline, despite the overall favorable fundamental background for buyers.

The primary factor driving the increase in precious metal prices in recent days has been the weakness of the U.S. dollar. However, it is fair to mention that the dollar's exchange rate was quite stable this morning and even increased by 0.06% to reach 99.83 at the time of preparing this material.

Nevertheless, the U.S. Consumer Price Index report released on Wednesday significantly weakened the positions of the American currency against other majors. The annual consumer inflation rate in the U.S. fell from 4% to 3% in June, although analysts had predicted a decrease to 3.1%. The core inflation in the world's second largest economy decreased from 5.3% in May to 4.8% in June. This decline was more substantial than what experts had expected (they only anticipated a decrease in inflation to 5%).

The Producer Price Index data, released on Thursday, also showed a decline, from 0.9% to 0.1% on an annual basis. The core index, in this case, corrected down from 2.8% to 2.4%.

These factors have influenced analysts to revise their earlier forecasts regarding U.S. monetary policy. It is now expected that the Federal Reserve will only raise interest rates once by the end of this year, and will announce it at the July meeting.

According to the CME FedWatch tool, indicating expectations for the U.S. key interest rate, the probability of a rate hike this month exceeds 90%. However, the probability of another hike after July is estimated at 15%, compared to a previous level of 40% earlier this week.

The U.S. dollar was the biggest loser amid such news, while commodity prices, which are denominated in the American currency, benefited.

In addition to these factors, the demand for gold is supported by the decline in U.S. Treasury bond yields, which serve as an alternative cost of holding non-interest-bearing metals. The yield on U.S. Treasury bonds has reached multi-month lows and continues to decline.

The yield on 2-year Treasury notes has fallen to 4.65%, while the yield on 10-year Treasury notes dropped to 3.80%. Over the past week, the yield on 2-year bonds decreased by 6%, while the yield on 10-year bonds decreased by only 3%.

As the U.S. dollar and Treasury yields decline, and the Federal Reserve plans a long-term pause in interest rate hikes, holding long positions with a target of $2,000 is the most reasonable decision for the XAU/USD pair.