Gold prices fell over 0.90% on Friday, dropping below the $2,500 mark for the second time this week. At the time of writing, XAU/USD is trading at $2,497 after reaching a high of $2,526 earlier in the week. This decline followed the release of inflation data from the U.S. Department of Commerce, showing that core Personal Consumption Expenditures (PCE) Price Index inflation continued to edge lower in July.
The report from the U.S. Bureau of Economic Analysis (BEA) indicated that the core PCE, the Federal Reserve’s preferred inflation measure, came in slightly below expectations but matched June’s figures. This data aligns with the Fed’s plan to potentially ease monetary policy in the upcoming September meeting, though there is still uncertainty regarding the magnitude of the initial rate cut.
Despite the Fed’s “gradualism” approach, investors are speculating that the Fed might implement a 50 basis points (bps) cut. The CME FedWatch Tool currently shows a 69% probability for a 25 bps rate cut and a 31% chance for a 50 bps reduction. The upcoming U.S. Nonfarm Payrolls report will be pivotal, especially following Fed Chair Jerome Powell’s comments suggesting that employment risks are skewed to the upside.
Despite recent fluctuations, bullion prices are poised for a 2% gain in August, following a peak of $2,531 on August 20.
Looking ahead to next week, the U.S. economic calendar will be packed with significant releases, including the ISM Manufacturing and Services PMIs, jobs data, and the Balance of Trade report.
