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Gold prices remained stable on Tuesday as investors awaited critical U.S. inflation data, which could provide clues on the Federal Reserve’s upcoming monetary policy decisions. Both the Consumer Price Index (CPI) and Producer Price Index (PPI) data, due later this week, are expected to play a crucial role in shaping market expectations for a potential rate cut during the Fed’s meeting later this month. Spot gold hovered at $2,504.98 per ounce as of 0027 GMT, while U.S. gold futures saw a marginal increase of 0.1%, reaching $2,533.70.
See: Gold price remained stable as seen on the VT Markets app.
Traders and investors are eyeing the CPI report for signs of inflation continuing its gradual descent towards the Fed’s 2% target. This data will be followed by Thursday’s PPI release, which will offer further insights into the price pressures faced by producers.
The New York Federal Reserve reported that the public’s inflation expectations held steady in August, even as current price pressures began to ease. This stability in expectations adds to the growing belief that the Fed may opt for a less aggressive stance on interest rates.
Traders now see a 70% chance of a 25-basis-point interest rate cut at the Federal Reserve’s September 17-18 meeting. There’s also a 30% chance of a larger 50-basis-point cut. A lower interest rate would reduce the opportunity cost of holding non-yielding assets like gold, which often benefits from a looser monetary policy. However, should the Fed decide on a smaller rate cut, gold’s movement might remain subdued, with a larger cut potentially fueling a stronger rally as investors seek refuge in the precious metal amid a weakening U.S. dollar.
Economic data released over the past week further reinforced the market’s cautious outlook. U.S. employment growth in August was slower than expected, yet the jobless rate dropped to 4.2%, indicating that while the labour market is softening, it remains relatively resilient.
This mixed data complicates the decision-making process for the Fed, as the labour market doesn’t appear to be weakening enough to warrant an aggressive 50-basis-point cut. In addition, a report on Monday showed that U.S. wholesale inventories increased less than previously estimated in July, casting doubt on the role inventory investment will play in driving third-quarter economic growth.
In case you missed: Gold struggles for momentum as markets focus on US jobs data
Precious metals show mixed results with silver down, platinum and palladium up
The broader precious metals market displayed mixed results. Silver fell by 0.2%, bringing prices to $28.29 per ounce. In contrast, platinum gained 0.4% to $941.25 per ounce, and palladium inched up 0.1% to $945.75 per ounce. Industrial demand continues to influence platinum and palladium prices, while silver remains under pressure from market uncertainties.
Looking ahead, gold’s future movement will hinge largely on the inflation data released this week. A higher-than-expected inflation reading could temper expectations for aggressive rate cuts, limiting gold’s upside potential. Conversely, weaker inflation figures would likely increase the probability of looser monetary policy, boosting gold’s appeal as a safe-haven asset. Meanwhile, platinum and palladium prices may continue to react to shifts in industrial demand, while silver could remain subdued if broader economic indicators point to slowing growth.
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