Gold hardly changed as profit-taking overwhelms US rate hopes

Bengaluru — Prices of safe-haven gold were flat on Monday as some profit-taking partially offset support from US recession jitters and rising expectations of a September rate cut from the Federal Reserve.

Spot gold held its ground at $2,443.44/oz by 3.35am GMT, after falling 1% earlier in the session. US gold futures rose 0.7% to $2,485.80.

“There is some profit-taking happening while traders try to gauge how aggressive the Fed may become in September with regards to the size of the rate cut,” said Tim Waterer, chief market analyst, KCM Trade.

However, “the fundamental picture [for gold] hints at further gains given the expectations for dovish US monetary policy”.

Data on Friday showed that US job growth in July fell short of expectations, with the unemployment rate rising to 4.3%, pointing to possible weakness in the labour market and greater vulnerability to recession. This strengthened the case for a rate cut at the Federal Reserve’s meeting on September 17-18.

Traders are pricing a more than 70% chance of the US central bank lowering rates by 50 basis points (bps) in September, compared with an 11.5% chance a week earlier, according to CME FedWatch tool.

Lower interest rates reduce the opportunity cost of holding a non-yielding bullion.

Meanwhile, on Friday, Richmond Federal Reserve president Thomas Barkin maintained a cautious outlook, stating he is not ready to adjust his monetary policy.

Investors will keep a tab on final July S&P Global services and ISM non-manufacturing PMI due later in the day.

Elsewhere, the Pentagon announced on Friday that the US military would deploy additional fighter jets and Navy warships to the Middle East to strengthen defence against threats from Iran and its allies, Hamas and Hezbollah.

Spot silver was flat at $28.52/oz, platinum fell 0.5% to $953.25 and palladium was almost unchanged at $889.98.

Reuters