Gold steady as US inflation data underpins bets for Fed rate pause
Gold prices steadied on Thursday near three-week lows touched in the previous session after U.S. inflation data raised expectations that the Federal Reserve will hold fire on rates next week.
Spot gold was flat at $1,905.49 per ounce by 0747 GMT, hovering around its lowest level since Aug. 25 hit on Wednesday at $1,905.10. U.S. gold futures fell 0.3% to $1,926.70.
“The big uncertainty is Fed rate-cut trajectory for 2024 and that remains one of the catalysts driving gold volatility,” said OCBC Executive Director and FX Strategist Christopher Wong.
“U.S. CPI was largely within expectations and in a way earlier concerns of higher price pressures were alleviated.”
The U.S. dollar index and 10-year Treasury yields eased after the Labor Department report on Wednesday showed that the annual rise in underlying inflation was the smallest in nearly two years, suggesting the Fed will keep rates unchanged next week. [USD/] [US/]
U.S. consumer prices in August, however, increased by the most in 14 months as the cost of gasoline surged. [O/R]
Traders now see a 97% chance of the Fed leaving rates unchanged on Wednesday, but there’s a 42% probability of a rate rise in November, according to the CME’s FedWatch Tool.
“Investors are waiting see whether the upcoming PPI data mirrors the move higher in the CPI numbers,” said KCM Trade Chief Market analyst Tim Waterer.
“If the tick higher in inflation gets repeated in coming months, then further tightening by the Fed is very much in play. November is increasingly looking like it will be a ‘live’ meeting given the rise in energy prices.” [O/R]
The European Central Bank is also set to decide later in the day whether to raise its key interest rate to a record peak.
Silver shed 1.5% to $22.49 per ounce, platinum edged down 0.1% to $898.94 and palladium fell 0.52% to $1,252.53.