Gold extends gains over 1% as US PPI data solidifies rate cut hopes

Gold rose over 1% on Friday after a US inflation data cemented prospects of a rate cut next month, restraining the dollar below recent highs, while safe-haven demand stemming from the geopolitical tensions in the Middle East also lifted the bullion.

Spot gold rose 1.1% to USD 2,658.42 per ounce by 1:42 p.m. ET (1742 GMT), up for the second straight session, and US gold futures settled 1.4% higher at USD 2676.30.

“The economy is still relatively strong, and the Fed is still in a paradox where they’re looking at cutting rates because some sectors have slowed down significantly, like housing,” said Daniel Pavilonis, senior market strategist at RJO Futures.

US producer prices were unchanged in September, pointing to a still-favorable inflation outlook and supporting expectations of Fed rate cut next month.

“The PPI numbers leaned friendly for the precious metals market bulls and suggest the Fed remains on track for two quarter-point interest rate cuts this year,” Jim Wyckoff, senior market analyst at Kitco Metals, said.

This follows data on Thursday showing US consumer prices rose slightly more than expected last month, but the annual increase in inflation was the smallest in more than 3-1/2 years.

“Gold is expected to reach USD 3,000 by 2025 due to geopolitical tensions, inflation concerns, and election uncertainties,” Pavilonis added.

The dollar held below a two-month high against a basket of peers on Friday.

On the physical front, gold dealers in India charged premiums for the first time in two months this week as the upcoming festival season attracted some jewelry buying.

“Gold ETF holdings rose by almost 95 tons in the third quarter. This means that ETFs are making a positive contribution to gold demand again for the first time in ten quarters,” Commerzbank said in a note.

Spot silver rose 1.1% to USD 31.54 per ounce and platinum climbed 1.9% to USD 986.15. Both metals were headed for weekly declines.

Palladium fell 0.5% to USD 1,063.55, but was up nearly 5% for the week.

(Reporting by Anushree Mukherjee and Swati Verma in Bengaluru; Editing by Vijay Kishore, Tasim Zahid, and Shreya Biswas)