Gold prices remained steady on Tuesday as investors awaited critical US inflation data, which could influence the Federal Reserve’s upcoming monetary policy decisions. Key reports, including the Consumer Price Index (CPI) and Producer Price Index (PPI), expected later this week, are seen as pivotal in shaping market predictions for a potential rate cut at the Fed’s meeting this month. Spot gold held at USD 2,504.98 per ounce as of 00:27 GMT, while US gold futures edged up by 0.1%, reaching USD 2,533.70.
Traders are closely watching the CPI report for indications of inflation continuing its progress towards the Federal Reserve’s 2% target. The CPI release will be followed by Thursday’s PPI data, providing further insights into price pressures affecting producers.
According to the New York Federal Reserve, inflation expectations among the public remained steady in August, even as current price pressures eased. This trend supports the view that the Fed may adopt a more cautious approach to rate adjustments.
Currently, markets estimate a 70% likelihood of a 25-basis-point rate cut during the Fed’s 17-18 September meeting, with a 30% chance of a 50-basis-point cut. Lower interest rates generally benefit gold, a non-yielding asset, as they reduce the opportunity cost of holding it.
Should the Fed opt for a smaller rate cut, gold’s movement may be modest, whereas a larger cut could spur a stronger rally as investors turn to gold amid a weakening US dollar.
Recent economic reports have presented a mixed picture, complicating the Fed’s decision-making process.
August’s employment growth was slower than expected, but the unemployment rate dropped to 4.2%, suggesting that while the labour market is softening, it remains relatively stable.
Further complicating matters, a report on Monday revealed that US wholesale inventories in July increased less than previously projected, raising concerns about the contribution of inventory investment to third-quarter economic growth.
The broader precious metals market showed mixed results. Silver slipped by 0.2% to USD 28.29 per ounce, while platinum rose by 0.4% to USD 941.25 per ounce, and palladium edged up by 0.1% to USD 945.75 per ounce. Industrial demand continues to support platinum and palladium prices, while silver remains under pressure amid economic uncertainties.
Looking ahead, gold’s movement will largely depend on the inflation data expected this week. A higher-than-anticipated inflation reading could dampen expectations for significant rate cuts, limiting gold’s upside potential.
Conversely, weaker inflation data could strengthen the case for a looser monetary policy, enhancing gold’s appeal as a safe-haven asset. Platinum and palladium may continue to be driven by industrial demand, while silver could face further pressure if broader economic indicators point to slowing growth.
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