August 31, 2024
New Delhi, India
Gold Prices
Gold prices fell below $2,500 on Friday, marking the second day this week under the key level, as the latest US economic data fueled expectations of a Federal Reserve interest rate cut in September. Gold (XAU/USD) was trading at $2,497, down over 0.90%, after reaching a high of $2,526 earlier in the day.
Key Highlights:
- US PCE Report Impact: The core Personal Consumption Expenditures (PCE) Price Index for July, the Fed’s preferred inflation gauge, showed inflation continued to ease, slightly missing estimates but matching June’s data. This reinforced market speculation about a potential policy easing by the Fed in September.
- Rate Cut Bets: Following the PCE data, the probability of a 25 basis points (bps) rate cut by the Fed rose to 69%, while the odds of a 50 bps cut fell to 31%, according to the CME FedWatch Tool.
- Gold Price Movement: Gold prices, which hit an all-time high of $2,531 on August 20, are still on track for a 2% gain in August despite the recent dip below $2,500.
Market Reactions and Future Outlook
Fed Policy and Market Sentiment:
- The Fed’s cautious “gradualism” stance has created uncertainty over the size of the potential rate cut. While some investors speculate a 50 bps cut, the majority favor a smaller, 25 bps cut at the September meeting.
- Next week’s US economic calendar is packed with key data releases, including ISM Manufacturing and Services PMIs, jobs data, and the Balance of Trade, which could further influence market expectations.
Additional Economic Data:
- Inflation Trends: The July core PCE showed a year-on-year increase of 2.6%, in line with the previous month but slightly below the 2.7% forecast. The headline PCE rose by 2.5% YoY, also below the 2.6% estimate.
- Consumer Behavior: While consumer spending rose, sluggish income growth raised concerns about the sustainability of current spending levels. The University of Michigan reported an increase in US Consumer Sentiment from 66.4 in July to 67.9 in August, with inflation expectations dipping to 2.8% for the year ahead.
Disclaimer:
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