Gold rises on softer dollar; market awaits further Fed guidance

Gold prices rose on Tuesday driven by a weaker dollar, with investors awaiting inflation data that might provide insights on the scale of an expected interest rate cut by the Federal Reserve next month.

Spot gold rose 0.3% to USD 2,524.94 per ounce, as of 2:57 p.m. ET (1857 GMT), shy of the record high of USD 2,531.60 hit last week. US gold futures settled 0.1% lower to USD 2,552.90.

The dollar index fell 0.3%, making gold more attractive for other currency holders.

“Biggest thing right now is the drop in the US dollar that we’ve seen over the last hour has given gold a little bit of a push here, and you’re seeing a lot of buying on this dip,” said Bob Haberkorn, senior market strategist at RJO Futures.

Investors now await the release of the Personal Consumption Expenditures (PCE) data, a key inflation report and the Fed’s preferred inflation gauge, scheduled for Friday.

A surprise of hotter-than-expected inflation data could slightly influence the Fed’s policy, but it is assured they will cut interest rates in September and possibly again this year, Jim Wyckoff, senior market analyst at Kitco Metals, said.

Traders see a 63.5% chance of a 25-basis-point (bp) rate cut in September and about a 36.5% probability of a bigger 50-bp reduction, according to the CME FedWatch tool.

Bullion remains above the USD 2,500 per-ounce psychological level and is heading for its best year since 2020, driven by investor optimism about upcoming US rate cuts and lingering concerns about the Middle East conflict.

“Much of the positive news for gold may therefore already have been priced in. We feel vindicated in our view that gold has no significant upside potential for the time being,” Commerzbank wrote in a note.

“We see more room for the three other precious metals that have not caught up with gold in recent weeks”

Among other metals, spot silver rose 0.6% to USD 30.07 per ounce, while platinum fell 0.1% to USD 960.90 and palladium gained 1.8% to USD 975.58.

(Reporting by Anushree Mukherjee in Bengaluru; Editing by Krishna Chandra Eluri and Mohammed Safi Shamsi)