Gold prices steady with spotlight on US inflation data

Gold prices held their ground on Monday, as investors awaited the US inflation report for further clues on the potential size of the Federal Reserve’s interest-rate cut.

Spot gold was little changed at USD 2,499.79 per ounce by 1:54 p.m. ET (1754 GMT).

US gold futures settled 0.3% higher at USD 2,532.70.

Bullion “will probably be fairly consolidated, perhaps a little bit choppy in the established range in gold,” said Peter A. Grant, vice president and senior metals strategist at Zaner Metals, who expects gold to hit all-time highs.

Bullion hit a record high of USD 2,531.60 on Aug. 20.

Traders now see a 73% chance of a 25-basis-point cut at the Fed’s meeting next week, and a 27% chance of a 50 bp reduction, according to the CME FedWatch tool.

“The market seems to be reconciling that the Fed is probably more likely to do the smaller 25-basis-point cut and that’s been my position all along,” Grant added.

Lower interest rates reduce the opportunity cost of holding the zero-yield bullion.

Last week, a report showed US employment increased less than expected in August, but a drop in the jobless rate to 4.2% suggested the labour market was not falling off a cliff to warrant a half-point cut.

Investors will now watch out for August US consumer price data on Wednesday and the producer price index on Thursday.

“If inflation numbers come much lower than expected and raise hopes for a 50-bp cut, then gold could hit all-time highs. But even if the consensus stays for a 25-bp cut, gold wouldn’t see a dramatic loss in prices as the Fed is definitely cutting rates,” Kinesis Money market analyst Carlo Alberto De Casa said.

The US public’s outlook for inflationary pressures was little changed last month, according to a report released on Monday by the New York Federal Reserve.

Spot silver rose 1.2% to USD 28.26 per ounce, platinum gained 2.3% to USD 942.45 and palladium was up more than 3% at USD 945.72.

(Reporting by Anushree Mukherjee and Ashitha Shivaprasad in Bengaluru; Editing by Emelia Sithole-Matarise, Krishna Chandra Eluri, and Shreya Biswas)