Gold gains nearly 1% as investors zero in on Fed cuts, inflation data

Gold prices gained around 1% on Thursday, fuelled by strong expectations of a Federal Reserve rate cut in September with investors focusing on US inflation data for further insights on the potential size of the cut.

Spot gold rose 0.9% to USD 2,524.45 per ounce by 1:52 p.m. ET (1752 GMT). US gold futures settled 0.9% higher at USD 2,560.3.

“The market seems to be penciling in a rate cut no matter what, and now it is simply a question of what size – how big of a rate cut does the Fed do,” said Everett Millman, chief market analyst with Gainesville Coins.

“My expectation right now is that at least until we get to the next Fed meeting, the gold market will probably chop sideways, but there does seem to be that strong floor of support because of geopolitics.”

The Israeli military said its troops killed five Palestinian militants who were hiding inside a mosque in the West Bank city of Tulkarm.

Gold is used as a safe investment during times of economic and geopolitical uncertainties.

Data earlier showed US initial jobless claims slipped last week, with the Labor Department adding that the unemployment rate probably remained high in August. Fed Chair Jerome Powell last Friday signaled interest rate cuts were imminent in a nod to concerns over the jobs market.

Traders see a 65.5% chance of a 25-basis-point (bp) rate cut in September and about a 34.5% probability of a bigger 50-bp reduction, according to the CME FedWatch tool.

Investors are now looking at the Personal Consumption Expenditures (PCE) price index, the Fed’s preferred measure of inflation, on Friday.

Spot silver firmed 1.5% to USD 29.53. Platinum gained 1.3% to USD 942.06 and palladium was up 3.5% to USD 979.72.

“As a trend, the market has very much turned away from battery EVs and much more into standard ICE vehicles and hybrids,” said Bart Melek, head of commodity strategies at TD Securities.

Both platinum and palladium are used by automakers in catalytic converters to reduce exhaust emissions.

(Reporting by Anushree Mukherjee, Ashitha Shivaprasad, and Anjana Anil in Bengaluru; Editing by Krishna Chandra Eluri)