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Gold rises on Fed rate-cut expectations, U.S. inflation data in focus

Gold traded in a narrow price range on Wednesday as investors looked forward to a key U.S. inflation reading that could shed more light on the Federal Reserve’s interest rates trajectory.

Alexander Manzyuk | Anadolu Agency | Getty Images

Gold prices rose on Wednesday after comments from Federal Reserve Chair Jerome Powell raised expectations that the U.S. central bank is on track to lower interest rates soon, while investors awaited U.S. inflation data for more cues.

Spot gold rose 0.6% to $2,378.25 per ounce. U.S. gold futures climbed 0.7% to $2,384.80.

“Powell did not deliver any hawkish surprises in his speech to the Senate yesterday, and that kind of assuaged the marketplace about any notions the Fed would not be able to cut interest rates yet this year,” said Jim Wyckoff, senior market analyst at Kitco Metals.

On Tuesday, Powell maintained a cautious tone and added that “more good data would strengthen” the case for loose monetary policy.

Markets are pricing in a 75% chance of the Fed cutting interest rates in September according to the CME FedWatch tool as well as another cut in December. Non-yielding bullion’s appeal tends to shine when interest rates fall.

The focus now shifts to U.S. consumer price index (CPI) data due on Thursday and the producer price index (PPI) report on Friday, with recent numbers showing inflation cooled from unexpectedly high levels at the start of the year.

“If those reports come in as expected … to show cooling inflation, then we can see the gold-silver markets continue to trade sideways to higher,” Wyckoff added.

Offering further support to gold, the dollar was down 0.1% against its rivals, making gold less expensive for other currency holders.

Meanwhile, global physically backed gold exchange-traded funds saw the second consecutive month of inflows in June due to additions to holdings by Europe- and Asia-listed funds, the World Gold Council said on Tuesday.

Meanwhile, spot silver gained about 0.3% to $30.89 per ounce, platinum rose 0.7% to $990.96 and palladium gained 0.8% to $989.86.

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