Gold prices rose in the European market on Wednesday, resuming gains that had paused yesterday amid correction and profit-taking, moving once again near all-time highs as safe-haven buying continues. Gains, however, were capped by the rebound of the US dollar in the foreign exchange market.
A series of weak US labor market data has increased expectations that the Federal Reserve will deliver deeper interest rate cuts. To reprice those expectations, investors are awaiting the release of key US inflation data starting today.
Price Overview
• Gold prices today: Gold rose by 0.6% to ($3,648.49), from the opening level at ($3,626.39), recording the lowest at ($3,620.79).
• At Tuesday’s settlement, gold prices lost 0.3%, marking the first decline in three sessions due to correction and profit-taking, after earlier reaching an all-time high of $3,674.80 per ounce.
US Dollar
The dollar index rose on Wednesday by 0.2%, extending gains for the second consecutive session as the recovery from a seven-week low continues, reflecting the rebound of the US currency against a basket of global counterparts.
In addition to buying from lower levels, the US dollar’s rebound comes ahead of the release of key US inflation data, which will provide decisive evidence on the likelihood of US interest rate cuts in September and October.
Concerns over Federal Reserve stability have eased, especially after President Trump was blocked from dismissing Fed Governor Lisa Cook while the lawsuit remains ongoing in US courts.
US Interest Rates
• Data from the Bureau of Labor Statistics showed payroll numbers were revised down by 911,000 jobs over the twelve months through March. In the preceding twelve months through March 2024, employment was revised lower by 598,000 jobs.
• According to the CME FedWatch tool: the probability of a 25-basis-point rate cut in September is currently priced at 100%, with a 10% chance of a 50-basis-point cut.
• The probability of a 25-basis-point cut in October is also currently priced at 100%, with an 8% chance of a 50-basis-point cut.
• To reaffirm these odds, investors are awaiting key US inflation data throughout this week ahead of next week’s Federal Reserve meeting.
• Later today, producer price data for August will be released, serving as a leading indicator for September’s consumer prices. Consumer price data for August will be released tomorrow, Thursday.
Gold Performance Outlook
• Kyle Rodda, market analyst at Capital.com, said: Sentiment is extremely optimistic. Several key factors are currently supporting gold prices, most importantly expectations of a US interest rate cut.
• Rodda added: The short-term outlook depends heavily on inflation data. If it comes in higher than expected, the odds of a rate cut could slip slightly from the curve, which may trigger a pullback in the gold market that is currently in technically overbought territory.
SPDR Fund
Gold holdings at SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, remained unchanged yesterday, keeping the total at 979.68 metric tons, the lowest since August 29.
