Gold extends gains as rate cut bets strengthen after US economic data

Gold prices extended gains on Thursday after traders added to bets that the Federal Reserve will deliver an interest-rate cut next month following the latest US economic data.

Spot gold was up 0.6% at USD 2,623.58 per ounce as of 1:59 p.m. ET (1759 GMT), on track to snap a six-session losing streak. US gold futures settled 0.5% higher to USD 2,639.30.

US consumer prices rose slightly more than expected in September, but the annual increase in inflation was the smallest in more than 3-1/2 years. Another report showed that weekly jobless claims rose to 258,000 for the week ending Oct. 5, versus estimates of 230,000.

The CPI report didn’t bring much of a surprise and the jobs numbers show a trend of weakening, which puts the notion that the Fed is on track to cut rates, helping gold, said Alex Ebkarian, chief operating officer at Allegiance Gold.

“Last few days, saw cooling in gold’s rally, so it is in a good position to go back up,” Ebkarian added.

Markets now see an 80% likelihood of a 25-basis-point cut from the Fed next month versus 76% before the data, according to the CME FedWatch tool.

Zero-yield bullion is a preferred investment amid lower interest rates.

Investors’ focus will shift to US Producer Price Index data on Friday for additional insights on rate cuts.

Heightened geopolitical events and strong demand led by central banks are the other positive catalysts for gold, Ebkarian added.

In the Middle East, Israel pressed its assault on Hezbollah and told Lebanese civilians not to return to homes in the south.

Spot silver rose 1.7% to USD 31.02 per ounce.

“Easing monetary policy and an undersupplied market will likely attract investor interest, with silver remaining an inexpensive alternative to gold,” ANZ said in a note.

Platinum added 2.4% to USD 967.17, and palladium was up 3% to USD 1,070.50.

(Reporting by Anushree Mukherjee in Bengaluru; Editing by Tasim Zahid and Vijay Kishore)