Gold (XAU/USD) recovered to trade in the $2,660s per troy ounce on Friday, following the release of weaker-than-expected US inflation data. The US Core Personal Consumption Expenditures (PCE) index, a key inflation gauge, showed a modest 0.1% increase month-over-month in August, below the 0.2% forecast. This disinflationary trend signals that the Federal Reserve may continue its gradual interest rate cuts, which benefits gold as a non-yielding asset.
Year-over-year, Core PCE rose 2.7%, slightly above July’s 2.6%, while headline PCE grew by 2.2%, down from the prior 2.5%. The lower-than-expected inflation numbers caused a softening in the US dollar, supporting gold’s rebound after earlier losses driven by fading impacts of Chinese government stimulus and more conservative global central bank policies.
Gold had touched a new record high earlier in the week but stalled as global monetary policymakers, including the Swiss National Bank and Bank of Mexico, implemented only modest rate cuts. Meanwhile, a Reuters poll suggests the Reserve Bank of India will cut rates by a cautious 50 bps over the next six months. Additionally, easing expectations for a 50 bps Fed rate cut in November—down to 50% from over 60%—after stronger-than-expected US economic data, including Jobless Claims and Durable Goods Orders, further influenced gold’s price movement.
Safe-haven demand for gold has also been affected by geopolitical developments. Despite ongoing tensions in the Middle East, fears of a broader conflict involving Israel and Hezbollah have subsided for now, although heightened tensions in the Red Sea, with Houthi rebels targeting oil tankers, continue to pose risks.
Looking ahead, if geopolitical tensions flare up—particularly with the possibility of an Israeli ground offensive—investors could turn back to gold for safety, pushing prices higher again.
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