Gold prices were modestly higher on Thursday morning as traders took a step back following a recent rally, opting to consolidate their positions ahead of key US economic data that could offer more clarity on the Federal Reserve's interest rate strategy.
At the time of writing, gold futures rose 0.1% to $3,449.90 per ounce, while spot gold climbed 0.4% to $3,396.90 per ounce.
“We've got a lot of positive interest for gold because of that sort of issues with institutional trusts and risks about Fed's independence,” said Kyle Rodda, Capital.com's financial market analyst.
The precious metal has drawn attention amid growing concerns over the Fed's autonomy, particularly in the wake of president Donald Trump's continued pressure on the central bank to lower borrowing costs. Non-interest-bearing assets such as gold may become more attractive to investors if expectations for rate cuts intensify. Lower rates typically make gold a more appealing investment as its non-yielding nature becomes less of a drawback in a low-rate environment.
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The market's focus is squarely on Friday’s release of the Personal Consumption Expenditures (PCE) Price Index, which is the Fed's preferred inflation measure. This data is expected to play a key role in shaping the central bank's stance on interest rates.
“But we're really looking for something more sort of to push the price above critical level of $3,400 … the US PCE data will be super significant. We are still bullish on gold. I think all the fundamentals moving in the right direction,” Rodda added.
Traders are factoring in an over 88% probability, according to the CME FedWatch Tool, that the Fed will implement a 25-basis-point rate cut during its next policy meeting.
New York Federal Reserve Bank president John Williams said on Wednesday rates will likely fall at some point, but policymakers will need to see upcoming economic data before deciding whether it is appropriate to make a cut at the Fed’s 16-17 September meeting.
Oil prices were down in early European trading, following a gain in the previous session, as investors recalibrated their outlook on US fuel demand and awaited India’s response to new US tariffs on imports.
Brent (BZ=F) crude futures lost 0.7% to trade at $66.41 per barrel at the time of writing, while West Texas Intermediate (CL=F) futures fell by 0.6% to $63.72 a barrel.
“Oil prices are pulling back this morning as traders reassess yesterday’s rally driven by the EIA report,” said Priyanka Sachdeva, a senior market analyst at Phillip Nova.
