Gold prices dipped slightly on Friday in Asian trading but remain on track for strong gains in August, driven by increasing expectations of a September interest rate cut from the Federal Reserve.
The market is closely watching the upcoming U.S. personal consumption expenditures (PCE) price index, the Fed’s preferred inflation measure, for guidance on the central bank’s next moves.
The dollar softened ahead of the PCE release and is poised for monthly losses in August, boosting gold and other metals. Spot gold edged down 0.2% to $3,409.89 per ounce, while October gold futures slipped 0.1% to $3,469.92/oz as of 01:48 ET (05:48 GMT).
August Gains Fueled by Rate Cut Bets
Gold has risen 3.7% so far in August, closing in on its April record high. Optimism around a Fed rate reduction has been supported by data pointing to a slowdown in the U.S. labor market.
Fed Chair Jerome Powell acknowledged this labor market cooling and indicated a potential 25-basis-point rate cut in September. He remained cautious about future easing, citing inflationary risks from President Donald Trump’s tariffs.
Market expectations for a September rate cut have surged, with CME FedWatch indicating an 82.9% chance of a 25-basis-point reduction next month. A weaker dollar and rising rate cut bets have lifted metals broadly, with the dollar index down nearly 2% for the month.
Platinum and silver have outperformed gold, gaining 5% and 5.9% respectively, as investors target relatively discounted prices. Copper futures climbed as well, with LME copper up 0.6% at $9,889.50 per ton and COMEX copper rising 0.6% to $4.5730 per pound, putting both contracts on track for August gains between 2.7% and 4.5%.
PCE Data to Guide Rate Decisions
The PCE report later Friday, especially core PCE, will be closely monitored by the Fed. Headline PCE is expected to remain largely steady, while core PCE may tick slightly higher in July, remaining above the Fed’s 2% annual target.
Investors are focused on potential signs of persistent inflation, which could influence the Fed’s plans for rate cuts. August’s report may also reveal the inflationary effects of Trump’s tariffs, many of which came into force this month.
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