Gold prices have increased due to expectations of a U.S. interest rate cut later this year. Comments from Federal Reserve officials have reinforced these expectations, leading to a rise in gold prices.
Spot gold was up 0.1% to $2,408.77 per ounce, while U.S. gold futures rose 0.2% to $2,449.50. The increase comes after gold fell to its lowest since July 26 in the previous session, caught in a global sell-off driven by fears of a U.S. recession.
Federal Reserve policymakers have pushed back against the notion that weaker-than-expected July jobs data means the economy is in a recessionary freefall, but also warned that the Fed will need to cut rates to avoid such an outcome. Fed San Francisco President Mary Daly said her mind was open to cutting interest rates as necessary and policy needed to be proactive.
Traders are now anticipating 110 basis points of easing this year from the Fed, with a 50 bps cut in September priced in at over 70% chance. Lower rates put pressure on the dollar and bond yields, while increasing the appeal of non-yielding bullion.
According to ANZ commodity strategist Soni Kumari, “If upcoming economic data out of U.S. comes out significantly weaker and the Fed becomes even more dovish, gold will move towards the $2,500 or beyond that.” Traders will also be looking at data from top consumer China, and with geopolitical tensions still running in the background, safe-haven demand should continue.
In other precious metals, spot silver fell 0.2% to $27.23 per ounce. Platinum was up 1.2% to $917.30, while palladium rose 0.9% to $857.25 after hitting its lowest levels since August 2018 on Monday.
