Gold dips on firmer dollar but holds near record highs ahead of US inflation data

Onome Amuge

Gold slipped on Thursday but remained close to all-time highs as a firmer US dollar and profit-taking weighed on sentiment, with investors awaiting inflation data that could shape expectations for Federal Reserve policy.

Spot gold was down 0.5 per cent at $3,621.19 per ounce, having touched a record high of $3,673.95 earlier in the week. US gold futures for December delivery fell 0.6 per cent to $3,659.70.

The dollar index edged 0.2 per cent higher to a near one-week peak against a basket of peers, making bullion more expensive for holders of other currencies. “Gold seems to be slightly pressured by a stabilizing dollar and profit-taking today. Nevertheless, the precious metal remains firmly bullish above the psychological $3,600 level with yesterday’s surprise drop in US producer prices limiting the downside,” said Lukman Otunuga, senior research analyst at FXTM.

US producer prices unexpectedly declined in August, reflecting weaker trade services margins and only modest goods cost increases. The softer reading, alongside weaker-than-expected nonfarm payrolls last week and downward revisions showing 911,000 fewer jobs in the 12 months through March, has strengthened market bets that the Fed will ease monetary policy next week.

“Signs of rising inflationary pressures may hit bets around the Fed cutting interest rates in October. This could trigger a selloff that may drag gold back toward $3,500. However, a soft CPI print may push gold toward fresh all-time highs,” Otunuga said.

Markets widely expect the Fed to trim rates by 25 basis points at its meeting next Wednesday, with futures also pricing in a slim 8 per cent chance of a more aggressive 50 basis point move, according to CME FedWatch data.

Lower borrowing costs typically support non-yielding assets such as gold by reducing the opportunity cost of holding them.

Elsewhere in precious metals, spot silver dipped 0.3 per cent to $41.01 per ounce. Platinum slid 0.6 per cent to $1,380.64, while palladium gained 0.7 per cent to $1,182.11.

Onome Amuge

Onome Amuge serves as online editor of Business A.M, bringing over a decade of journalism experience as a content writer and business news reporter specialising in analytical and engaging reporting. You can reach him via Facebook and X