NEW YORK: Gold slipped from a near two-week high on Monday as the dollar strengthened, although rising bets of interest rate cuts by the US Federal Reserve following Chair Jerome Powell’s dovish pivot last week, lent some support to bullion.
Spot gold inched down 0.1percent at USD3,367.86 per ounce, as of 0632 GMT, after hitting its highest since August 11 on Friday. US gold futures for December delivery eased 0.2 percent to USD3, 412.50. The dollar index rose 0.1 percent against its rivals after dropping to a four-week low, making gold less attractive to overseas buyers.
“There’s a decent level of support for gold around US$3,350 over the near term, with Powell’s dovish hints allowing gold to carve out a prominent swing low on Friday,” City Index senior analyst Matt Simpson said.
“A sustained rally likely requires softer PCE inflation and weaker employment data going forward. But with inflation likely to remain elevated, gold’s gains could remain capped beyond the expected initial bounce.” Powell on Friday signalled a possible rate cut at the Fed’s meeting next month, saying that risks to the job market were rising but inflation remained a threat, and that a decision wasn’t set in stone.
Markets are now pricing in an 87 percent chance of a quarter-point rate cut in the September policy meeting, and a cumulative reduction of 48 basis points by this year-end, according to CME FedWatch Tool. Gold tends to appreciate in a low-interest-rate environment, which reduces the opportunity cost of holding non-yielding bullion.
Asian share markets rallied on Monday as investors celebrated the likely resumption of US rate cuts. Investors now await US personal consumption prices data on Friday, which is expected to show core inflation creeping up to its highest since late 2023 at 2.9percent.
Elsewhere, spot silver rose 0.3 percent to USD38.94 per ounce, platinum fell 0.2 percent to USD1,359.66 and palladium was flat at USD1,126.41.
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