Gold inches higher as investors eye US data for rate cues

September 12, 2024

Key points:

• Spot gold rose to $2,515.59 as markets expect a 25-bps rate cut.
• U.S. PPI and jobless claims data are key for understanding Fed’s next move.
• The Fed is likely to proceed with a quarter-percentage-point rate cut in light of moderate inflation.

Gold prices edged higher as traders awaited crucial U.S. economic data that could offer clearer insight into the Federal Reserve’s upcoming rate cut decision. Spot gold (Symbol: XAUUSD) rose to $2,522.26 per ounce.

Picture: XAUUSD price rose markets expect a 25-bps rate cut, as observed on the VT Markets app.

On VT Markets, gold prices (XAUUSD) have continued to consolidate, with the current price at $2,516.12 per ounce.

The recent momentum has been driven by market expectations of a 25-basis-point rate cut by the Federal Reserve, along with upcoming data releases that could further influence the trajectory of gold prices.

Key data points like the U.S. Producer Price Index (PPI) and initial jobless claims will be closely monitored, as they may offer hints about inflationary pressures and the overall strength of the labour market.

The technical setup shows a slight bullish trend, with gold recovering from the $2,471 low seen earlier in the week. The price tested the $2,529 resistance but has not yet broken through. The EMA (24,24,72) shows price action hovering around the support level, suggesting a potential consolidation phase before the next leg higher.

Meanwhile, the MACD histogram is pointing towards mild upward momentum, but traders may be waiting for a catalyst to drive a stronger move.

Continued momentum for gold?

Such an upward trajectory will likely continue, potentially breaking the $2,532 mark, if stronger-than-expected macroeconomic data is reported. The U.S. PPI is expected to show a month-over-month increase of 0.1% and a year-over-year rise of 1.8%, reflecting a softening from last month’s 2.2%.

The U.S. consumer price index (CPI) data revealed a modest rise in inflation, which has so far supported the case for maintaining gold prices above $2,500. However, stickier underlying inflation may prevent the Fed from considering a more aggressive 50-basis-point rate cut.

Read also: Interest rate tug-of-war for central banks

As central bankers focus on maintaining economic stability while reducing the chances of a recession, next week’s anticipated 25-basis-point reduction is seen as a cautious step forward.

Outlook for gold traders

Short-term traders are eyeing U.S. economic data releases as pivotal for the next movement in gold trading.

However, stronger macro data could see gold retracing some gains, with traders closely monitoring the Fed’s final rate decision next week.

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