Gold fell to a three-day low, trading beneath $2,650 per troy ounce, as the US Bureau of Economic Analysis (BEA) reported that September inflation trends are aligning more closely with the Federal Reserve’s (Fed) target. The precious metal traded at $2,657, reflecting a decline of nearly 0.50% as traders appeared to be booking profits despite the data suggesting potential for further Fed easing.
The BEA’s report highlighted that the Fed’s preferred inflation measure, the Personal Consumption Expenditures Price Index (PCE), is inching toward the central bank’s 2% goal, with core PCE rising by 0.1% compared to July. This data helped lower the yield on the US 10-year Treasury note by five basis points, settling at 3.749%. Consequently, the US Dollar Index (DXY) slipped 0.16% to 100.41, indicating a weakening dollar that typically supports gold prices.
Despite the favorable conditions for gold, prices plummeted below the September 26 low of $2,654, signaling a potential deeper pullback. According to the CME FedWatch Tool, the odds of a 50 basis points rate cut during the Fed’s upcoming November meeting have increased, further adding to the uncertainty.
Additionally, other economic indicators showed improvements, with the University of Michigan Consumer Sentiment index recording a better-than-expected final reading for September.
On the geopolitical front, tensions in the Middle East escalated as Israel confirmed strikes on Hezbollah’s main headquarters in southern Beirut, raising concerns about a possible ground invasion, which could affect global markets, including gold.
While recent data revealed modest net inflows into gold ETFs, analysts believe that these investments have yet to significantly contribute to gold’s rally, though they expect increased activity from ETFs in the coming months as market dynamics shift.
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