Gold prices strengthened on Thursday as the U.S. dollar and Treasury yields weakened in response to U.S. inflation data, solidifying expectations for a Federal Reserve rate pause next week. However, gold remained in proximity to its recent near three-week lows.
Key Points:
Spot gold registered a 0.3% gain, reaching $1,912.09 per ounce as of 0110 GMT. It had hit its lowest point since August 25 on the preceding Wednesday at $1,905.10. Meanwhile, U.S. gold futures recorded a 0.1% increase, standing at $1,933.70.
The U.S. dollar index and 10-year Treasury yields experienced declines following the release of U.S. consumer prices data for August. The data revealed that consumer prices had increased by the most in 14 months, primarily due to surging gasoline prices. However, the annual rise in underlying inflation was the smallest it had been in nearly two years, indicating a potential Federal Reserve rate pause next week.
Federal Reserve officials were seeking signs of a clear decline in inflation and an economic slowdown, and recent data offered some evidence of both. Nevertheless, it may not have been enough to downplay the possibility of further rate increases later in the year.
Traders are currently estimating a 96% likelihood of the Federal Reserve leaving interest rates unchanged in its upcoming meeting, with a 51% chance of a pause in November, according to the CME’s FedWatch Tool.
On Thursday, the European Central Bank is scheduled to decide whether to raise its key interest rate to a record high. This decision represents the final step in its fight against inflation or a potential pause due to economic deterioration.
The world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, reported a 0.3% decrease in holdings, bringing the total to 882.00 tonnes on Wednesday.
In the broader precious metals market, spot silver saw a 0.3% increase to $22.89 per ounce, while platinum gained 0.2%, reaching $902.05, and palladium eased slightly by 0.2%, resting at $1,257.26.
