Gold prices rose in the European market on Friday, moving into positive territory, supported by the current decline in US dollar levels. However, they remain on track to post a weekly loss, as stronger-than-expected US producer price data reduced the likelihood of a large 50-basis-point interest rate cut by the Federal Reserve in September.
To reprice the existing expectations around a US interest rate cut, investors are awaiting the release later today of key US economic data on monthly retail sales and confidence levels in the world’s largest economy.
Price Overview
• Gold prices today: Gold rose by 0.4% to $3,348.77, from the opening level at $3,335.33, with the lowest price recorded at $3,332.33.
• At Thursday’s settlement, gold prices fell by 0.65%, marking their first loss in three days, due to the dollar’s rebound following strong US producer price data.
Weekly Performance
Over the course of this week, which officially ends at today’s settlement, gold prices are down about 1.5%, on track for their first weekly loss in three weeks amid slowing demand for the metal as a safe haven.
US Dollar
The US dollar index fell by 0.3% on Friday, resuming losses that paused temporarily yesterday and moving once again toward a two-week low, reflecting the decline in the US currency against a basket of major and minor peers.
US Interest Rates
• US producer prices in July recorded the fastest rise in three years, driven by a sharp increase in goods and services costs due to tariffs.
• Following the data, and according to the CME Group’s FedWatch tool, the pricing for a 25-basis-point cut in September fell from 99% to 92%, while the probability of keeping rates unchanged rose from 1% to 8%.
• The pricing for a 25-basis-point cut in October slipped from 99% to 93%, while the probability of no change rose from 1% to 7%.
• All expectations for a 50-basis-point cut in either September or October have completely faded.
• St. Louis Fed President Alberto Musalem stated that a half-point rate cut in September is unjustified, a day after Treasury Secretary Scott Bessent suggested it could be possible.
Important Data
To reassess the above US interest rate expectations, investors are watching for the release later today of US economic data on July retail sales, as well as the University of Michigan’s August confidence and inflation expectations indexes.
Gold Outlook
• Tim Waterer, chief market analyst at KCM Trade, said gold is still dealing with the fallout from the higher producer price index, which raised questions about the Fed’s willingness to cut rates this year.
• Waterer added that if the wholesale price rise becomes a trend that translates into higher consumer prices, expectations for US interest rate cuts may weaken, potentially capping gold’s upside from a yield perspective.
SPDR Fund
Gold holdings at SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell yesterday by 2.86 metric tons to 961.36 metric tons, down from 964.22 metric tons, which was the highest level since September 12, 2022.
