Gold prices fell in the European market on Wednesday, giving up a two-week high reached earlier in Asian trading, as correction and profit-taking activity picked up, alongside pressure from a stronger US dollar against a basket of global currencies.
On Thursday and Friday, investors await key US economic data to reprice expectations regarding Federal Reserve rate cuts in September and October.
Price Overview
Gold fell 0.6% to 3,373.91 dollars, from the opening level of 3,393.46 dollars, after reaching a high of 3,394.25 dollars, its strongest since August 11.
At Tuesday’s settlement, gold gained 0.8%, its second daily rise in three sessions, on safe-haven demand amid concerns over Fed stability.
US Dollar
The dollar index rose 0.5% on Wednesday, resuming gains after a temporary pause yesterday, nearing its highest level in several weeks, reflecting the US currency’s rise against a basket of major and minor peers.
After the shock caused by US President Donald Trump’s attempt to dismiss Lisa Cook from her position on the Federal Reserve Board, markets were unsettled over the Fed’s independence.
However, those concerns quickly eased as it became clear the matter was likely to turn into a lengthy legal dispute, giving markets some reassurance.
US Interest Rates
According to CME Group’s FedWatch tool: the probability of a 25-basis-point Fed rate cut in September is currently steady at 87%, while the probability of no change stands at 13%.
The probability of a 25-basis-point cut in October is steady at 94%, while the probability of no change stands at 6%.
To reprice these expectations, investors await important US data, including second-quarter GDP growth and jobless claims on Thursday, and the July Personal Consumption Expenditures report on Friday.
Outlook for Gold
Kelvin Wong, market analyst for Asia-Pacific at OANDA, said: “Short-term speculators are taking some profits right now. However, gold remains supported, especially as we start to see a more cautious Fed stance.”
Wong added: “In the near term, we expect continued upward pressure, potentially testing the 3,400-dollar level, with 3,435 dollars an ounce above that.”
SPDR Fund
Gold holdings at SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose by 1.43 metric tons yesterday, the second consecutive daily increase, bringing the total to 959.92 metric tons, the highest since August 19.
