Gold clings to one-month highs as cooling US inflation boosts Fed pause bets

Aug 31 – Gold steadied on Thursday, hovering near its one-month peak, after as-expected US inflation and weaker jobs numbers reinforced expectations that the Federal Reserve will keep interest rates on hold this year.

Spot gold edged down 0.1% to USD 1,940.23 per ounce at 1:51 p.m. EDT (1751 GMT), close to its highest since Aug. 2, at USD 1,948.79, hit on Wednesday.

US gold futures settled 0.4% lower at USD 1,965.90.

US inflation as measured by the personal consumption expenditures (PCE) price index rose 0.2% last month, matching June’s gain. In the 12 months through July, the PCE price index increased 3.3%, after advancing 3.0% in June.

US consumer spending, which accounts for more than two-thirds of the country’s economic activity, accelerated in July.

Weekly initial jobless claims fell 4,000 to 228,000. That compares with a four-week average of 237,500.

Bob Haberkorn, senior market strategist at RJO Futures, said that while the numbers were “not terrible”, they were “not great” either and may mean that the US Federal Reserve would be in a position to halt interest rate rises early next year.

Gold is now in a wait-and-watch mode, and a drop in bond yields could prompt some strength in bullion, Haberkorn added.

US Treasury yields and the dollar index ticked up, after briefly trimming their gains following the economic data, making non-yielding bullion less attractive.

Bets on the Fed leaving rates unchanged in September stood at 88.5%, while bets of a pause in November were at 51%, according to the CME Group’s FedWatch tool.

Silver eased 0.7% to USD 24.48 per ounce, having climbed to a more than one-month high on Wednesday. Platinum fell 0.8% to USD 966.05, but was headed for its second consecutive monthly gain.

Impala Platinum IMPJ.J Chief Executive Nico Muller said a rapid decline in palladium and rhodium prices has squeezed profits. “There was no immediate risk of mine closures, but management would weigh each mine’s potential to generate profit.”

Palladium fell 0.4% to USD 1,217.33, and was set for a 5% monthly fall. It is down 31% this year.

(Reporting by Harshit Verma in Bengaluru; Editing by Alexander Smith, Mark Potter, and Nick Macfie)