Onome Amuge
Gold prices held firm, consolidating gains from their best monthly rally since April, as fresh US inflation data boosted expectations that the Federal Reserve will begin cutting interest rates as early as September.
Spot gold rose 0.5 per cent to $3,433.99 per ounce, bringing its August advance to 4.4 per cent. US gold futures for December delivery gained 0.7 per cent to $3,497.30. The dollar was little changed in late trading but remained on course for a monthly decline of 2.1 per cent, making dollar-priced bullion cheaper for holders of other currencies.
The moves came after figures showed the US Personal Consumption Expenditures price index rose 0.2 per cent month on month in July and 2.6 per cent year on year, broadly in line with forecasts. Consumer spending also increased solidly, even as tariffs on some imports lifted goods prices.
The data reinforced investor conviction that US borrowing costs are headed lower. Traders on Friday priced in an 89 per cent probability of a 25 basis point cut at the Fed’s September meeting, up from 85 per cent before the release, according to CME FedWatch.
“We have expectations of a Fed rate cut, or potentially two, throughout this year, which is generally supportive for commodity prices across the board, including gold and silver,” said David Meger, director of metals trading at High Ridge Futures.
Gold, which yields no income, tends to benefit from lower interest rates as they reduce the opportunity cost of holding the metal.
Investor appetite for bullion has also been fuelled by political uncertainty around the Fed itself. A federal judge on Friday heard arguments over whether to temporarily bar Donald Trump from firing governor Lisa Cook, who is contesting the legality of her potential removal. The court adjourned without a ruling, with further submissions due this week.
“Gold is benefiting from this uncertainty around Fed independence, as shown by inflows into gold ETFs of just under 15 tonnes in the last two days,” said Commerzbank. “Nevertheless, the upside for gold above $3,400 is looking increasingly limited.”
Elsewhere in precious metals, spot silver gained 0.2 per cent to $39.14 an ounce, extending its monthly winning streak to four. Platinum fell 0.9 per cent to $1,347.77 but remained set for monthly gains, while palladium slipped 0.9 per cent to $1,092.18 and was on track for a loss over August.
