Gold prices experienced a slight decline on Thursday, remaining close to their record highs as investors eagerly anticipated the release of U.S. consumer inflation data later in the day. As of 0411 GMT, spot gold was down 0.2%, trading at $3,633.97 per ounce, following a peak of $3,673.95 on Tuesday. Meanwhile, U.S. gold futures for December delivery fell 0.3% to $3,671.90.
Market analysts noted that the recent fluctuations in gold prices may reflect a consolidation phase as traders await the U.S. Consumer Price Index (CPI) data, which is expected to significantly influence Federal Reserve rate cut expectations. Ilya Spivak, head of global macro at Tastylive, commented, “Gold seems to be consolidating recent gains as markets wait for U.S. Consumer Price Index data and what it’ll mean for Fed rate cut expectations.”
The backdrop for this cautious sentiment includes weaker-than-anticipated producer price figures released earlier, which showed a surprising reduction in prices. The decline was attributed to lower trade service margins and modest increases in the costs of goods. This has fueled speculation that the Federal Reserve may consider a rate cut during its upcoming meeting next week.
Investors are closely monitoring the U.S. CPI data scheduled for release at 1230 GMT, with a Reuters poll predicting a 0.3% monthly rise for August, in line with a 0.2% increase documented in July. Year-over-year, inflation is forecasted to hit 2.9%, up from 2.7% in the previous month.
Last week’s nonfarm payroll data indicated a weaker labor market, revealing about 911,000 fewer jobs throughout the previous year than initially reported. This development has led to increased expectations of monetary easing by the central bank. Additional jobless claims data set to be released at the same time as the CPI could provide further insights into employment trends.
Spivak warned that any surprises in the CPI report could strengthen the U.S. dollar and temporarily exert downward pressure on gold prices. “The trend points higher, but a hot CPI report may boost the dollar, hurt gold prices in the short term, forcing a pullback,” he noted. Nevertheless, he suggested that any losses might be limited, as market participants are unlikely to completely abandon their bets on rate cuts, even if those expectations are pushed further out in time.
The Federal Reserve is widely expected to implement a 25 basis point interest rate cut at its upcoming meeting, with some investors calculating a slim chance for a reduction of 50 basis points, according to the CME FedWatch tool. Lower interest rates generally provide support for non-yielding assets like gold.
In related market movements, spot silver dipped 0.1% to $41.10 per ounce, while platinum fell 0.2% to $1,383.50. Palladium showed some stability, remaining steady at $1,173.45.
