Gold edges higher amid expectation of September rate cuts

Bengaluru — Gold prices inched up on Thursday after a sharp rise in the last session as the dollar and bond yields weakened on the increasing likelihood of rate cuts by the US Federal Reserve as early as September.

Spot gold rose 0.1% at $2,388.10/oz by 2.55am GMT, after gaining more than 1% to its highest since April 19 on Wednesday. US gold futures rose 0.1% to $2,393.20.

The dollar fell 0.2% against a basket of other major currencies, making the greenback-priced bullion less expensive for other currency holders. The benchmark 10-year treasury yield hit its lowest in more than one month.

“Following the April consumer price index [CPI] data, the odds for a potential September rate cut have firmed, which suits the gold price from a yield perspective,” said Tim Waterer, chief market analyst at KCM Trade.

“With inflation coming off the boil, gold is effectively making hay while the sun is shining and looks poised to capture the $2,400 level. However, a potential bounce in the dollar or treasury yields could be the biggest hurdle for gold price in the remainder of the week.”

Cooling US consumer prices, along with last week’s lacklustre jobs report and a softer-than-expected US payrolls report for April, come as good news to Fed policymakers waiting to see renewed progress on inflation before reducing borrowing costs.

Bullion is known as an inflation hedge, but higher rates increase the opportunity cost of holding non-yielding gold.

Chicago Federal Reserve Bank president Austan Goolsbee said he was optimistic inflation would continue to come down, echoing Fed chair Jerome Powell’s comments earlier in the week when he noted that it was unlikely the central bank would have to raise interest rates again.

Spot silver fell 0.5% to $29.56/oz and palladium gained 0.3% to $1,012.93.

Platinum rose 0.7% to $1,071.00, hitting its highest since May 22 2023.

Reuters