Gold prices edged higher on Monday as traders prepared for August’s US inflation report and speculated on potential Federal Reserve rate cuts. As of the latest update, XAU/USD is trading at $2,502, marking a 0.23% increase.
The market sentiment improved overnight for North American traders, reflected in solid gains across US equities. US Treasury bond yields showed some retreat along both the short and long ends of the curve, with the 10-year Treasury note yielding 3.706%, unchanged from Friday’s close.
Despite a strong US Dollar, which saw gains exceeding 0.30% as indicated by the US Dollar Index (DXY), bullion traders maintained their focus on potential rate cuts rather than the Greenback’s strength.
The odds for a 50 basis points rate cut were pared back following last Friday’s Nonfarm Payrolls (NFP) report. While the NFP figures missed expectations, the Unemployment Rate decreased from 4.3% to 4.2%. Traders are now closely watching the upcoming Consumer Price Index (CPI) report, which is projected to move closer to the Fed’s 2% inflation target.
According to the CME FedWatch Tool, the probability of a 25 basis points rate cut has risen to 73%, while the likelihood of a 50 basis points cut stands at 27%. Reuters sources suggest that the market is leaning towards a smaller 25-basis-point cut, aligning with prevailing expectations.
Earlier, the New York Fed’s inflation expectations report showed that prices remain anchored at the 3% threshold, unchanged from the previous survey but still above the Fed’s target.
