Gold prices (XAU/USD) edged up to approximately $2,470 per troy ounce on Thursday, remaining near historic peaks amid increasing optimism for a Federal Reserve rate cut in September. Lower interest rates tend to enhance the appeal of non-yielding assets like gold.
Federal Reserve officials have signaled growing confidence that inflationary pressures are aligning more closely with the central bank’s targets. On Wednesday, Fed Governor Christopher Waller noted that the Fed is “getting closer” to implementing a rate cut. Additionally, Richmond Fed President Thomas Barkin observed that the reduction in inflation is becoming more widespread and expressed a desire for this trend to continue, according to Reuters. Traders will be closely watching the release of the US weekly Initial Jobless Claims and the Philadelphia Fed Manufacturing Index later today, as well as a speech by Fed official Lorie Logan.
CME Group’s FedWatch Tool now shows a 93.5% likelihood of a 25-basis point rate cut in September, a significant increase from the 69.7% probability observed a week ago.
In contrast, the US Dollar Index (DXY), which gauges the dollar’s strength against six major currencies, has rebounded due to stronger US Treasury yields. The DXY is trading around 103.80, with yields on 2-year and 10-year US Treasury bonds at 4.45% and 4.17%, respectively. This rebound in the dollar could potentially curb further gains in gold prices.
