Gold steady as slowing inflation boosts hope of rate-cut bets

Bengaluru — Gold prices held steady on Monday after data showed US inflation subsided, bolstering hopes that the Federal Reserve will start cutting interest rates in 2024.

Spot gold was nearly unchanged at $2,324.44/oz by 4.27am GMT. Prices jumped more than 4% in the second quarter. US gold futures eased 0.2% at $2,336.10.

Data showed on Friday that the personal consumption expenditures index, increased 2.6% after advancing 2.7% in April. May inflation readings were in line with economists’ expectations.

“The latest US inflation data remain fresh on investors’ mind, with the data coming in line with consensus and generally did little to sway current market rate expectations for the Fed’s easing process to kick-start in September,” said IG market strategist Yeap Jun Rong.

But, “any failure to defend the $2,280 level ahead may potentially pave the way for gold prices to head towards the $2,200 next.”

Traders are pricing in a 64% chance of a first rate cut in September, according to the CME FedWatch tool. Lower interest rates reduce the opportunity cost of holding non-yielding bullion.

Market focus shifts to remarks from Fed chair Jerome Powell on Tuesday, followed by minutes from the Fed’s latest policy meeting on Wednesday and US labour market data later in the week.

“Although central bank purchases have slowed down in recent months, we believe emerging markets’ central banks will continue to diversify their reserves into gold,” ANZ said in a quarterly note.

Spot silver dipped 0.2% to $29.06, platinum fell 0.7% to $986.08 and palladium held steady at $972.74.

Key metals consumer China’s manufacturing activity grew at the fastest pace in more than three years, a private sector survey showed. It contrasts with an official purchasing managers index (PMI) released on Sunday that showed a decline in manufacturing activity.

Reuters