Gold prices remained steady on Monday morning, maintaining their position just below record highs as investors paused to consider the expected rate cut from the US Federal Reserve later this week. This anticipated reduction in interest rates is seen as a supportive factor for gold; however, profit-taking and a stronger dollar limited any significant gains.
As of the latest reports, gold futures fell by 0.4% to $3,672.20 per ounce, while the spot price of gold was unchanged at $3,641.55 per troy ounce. Last week, gold surged to a record high of $3,673.95. Tim Waterer, chief market analyst at KCM Trade, noted that the current market dynamic was being influenced by traders locking in profits and a resilient dollar putting pressure on gold prices. He stated, “The bullish outlook remains in place; however, a period of consolidation or a minor pullback would arguably be a healthy outcome that supports gold’s ambitions for hitting loftier price targets down the road.”
The US dollar index rose 0.1% to 97.56, making gold, priced in dollars, more expensive for international buyers. This strength of the dollar acted as a counterbalance to gold’s potential gains. Recent consumer inflation data revealed inflation was slightly above expectations for August, but market analysts believe this will not thwart the Fed’s plans to cut rates by a quarter-percentage point on Wednesday. Waterer mentioned that a critical risk for gold is the Federal Reserve’s communication around future rate cuts, which could create uncertainty for investors.
Gold is often viewed as a safe haven in volatile markets, with its appeal rising in low-interest-rate conditions. The upcoming Fed meeting occurs amidst various challenges, including internal legal disputes over its leadership and external pressure from political figures like President Donald Trump.
Goldman Sachs provided an optimistic long-term forecast for gold, projecting a target price of $4,000 per ounce by mid-2026, but cautioned that rising speculative lengths in the market could lead to short-term pullbacks.
Meanwhile, in the oil market, prices saw an increase in early European trading, influenced by Ukrainian drone attacks on Russian refineries, which threaten to disrupt crude and fuel exports. Brent crude futures rose by 0.5% to $67.34 per barrel, while West Texas Intermediate futures climbed 0.6% to $63.03 a barrel. Analysts from JPMorgan noted that these attacks reflect a growing inclination to disrupt international oil markets, adding potential upward pressure on oil prices. The Primorsk oil terminal, a significant export hub for Russian oil capable of loading approximately 1 million barrels per day, has become a key focus, raising concerns about the reliability of Russian oil exports.
Furthermore, US-China trade discussions commenced in Madrid on Sunday, with a spotlight on Washington’s calls for its allies to impose tariffs on Chinese imports tied to the country’s purchases of Russian oil. Amidst this, concerns about oversupply persist as OPEC+ plans to boost output.
Additionally, recent US economic data showed softer job growth and rising inflation, raising questions about the robustness of the country’s economy and its impact on oil demand. The British pound also gained 0.2% against the dollar, trading at $1.3582, and similarly against the euro at €1.1571. The forex market is anticipating UK Consumer Price Index (CPI) data for August, crucial for gauging inflationary trends ahead of the Fed meeting.
Market sentiment surrounding the UK economy is shifting, with growing bets on potential rate cuts by the Bank of England before year-end. Expectations are for the central bank to maintain current rates during their upcoming meeting on Thursday, even as market participants watch for indicators that could influence future monetary policy. In the equities space, the FTSE 100 index dipped 0.1% to 9,273 points as the market navigates through these complex developments.
