Gold prices edged higher on Wednesday morning, buoyed by a softer US dollar following mild US inflation data that solidified expectations for an interest rate cut in September. Meanwhile, market participants looked ahead to this week’s high-stakes talks between US and Russian officials regarding the ongoing war in Ukraine.
At the time of writing, gold futures rose 0.2% to $3,404.90 per ounce, while spot gold inched up by 0.1% to $3,357.03 per ounce.
“The fall in the USD enabled a moderate bounce in the gold price, with the precious metal oscillating around the $3,350 level ahead of the Trump-Putin meeting on Friday,” said Tim Waterer, chief market analyst at KCM Trade.
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“If the meeting in Alaska doesn't resolve anything and the war in Ukraine continues, gold could be making a push back towards $3,400 once again,” he added.
The uptick in gold came as US inflation data, released on Tuesday, showed a modest rise in the Consumer Price Index (CPI), which increased by 0.2% in July, following a 0.3% increase in June. Year-over-year, the CPI was up 2.7%, signalling that inflation pressures are cooling.
This data reinforced market expectations that the Federal Reserve may soon cut interest rates, which tends to boost demand for non-yielding assets like gold. The decline in the US dollar supported the precious metal’s rise, as a weaker dollar makes gold more affordable for holders of other currencies.
Oil prices were lower in early European trading, after industry data revealed an increase in US crude inventories, reinforcing expectations that the peak summer demand season is winding down.
Brent (BZ=F) crude futures lost 0.2% to trade at $65.16 per barrel, at the time of writing, while West Texas Intermediate (CL=F) futures retreated by 0.3% to $63.02 a barrel.
The US driving season typically runs from Memorial Day weekend in late May through early September, and with the end of summer approaching, demand is expected to taper off.
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Citing figures from the American Petroleum Institute (API), market sources reported that US crude stocks, in the world’s largest oil consumer, rose by 1.52 million barrels last week. Gasoline inventories saw a decline, while distillate stocks experienced a slight increase.
Oil investors appeared to be in “wait-and-see mode” ahead of the meeting between US president Donald Trump and Russian president Vladimir Putin, according to ING commodity strategists.
