Gold prices are on an upward trajectory this month, buoyed by a weakened dollar and anticipation of a U.S. interest rate cut in September. On Friday, spot gold was slightly lower at $3,411.29 per ounce due to profit-taking, but had still seen a significant increase of 3.7% so far this month, reaching $3,423.16 on Thursday – its highest level since July 23. Similarly, U.S. gold futures for December delivery experienced a minor decline of 0.1% to $3,470.80.
The depreciating dollar has contributed to the rise in gold prices, as the greenback-priced gold becomes more attractively priced for investors using other currencies. Analysts, including Tim Waterer, Chief Market Analyst at KCM Trade, noted that precious metals like gold are popular among investors as they anticipate a period of looser monetary policy in the U.S. beginning next month.
Federal Reserve Governor Christopher Waller emphasized the need for short-term U.S. borrowing cost reductions and voiced his support for an interest rate cut next month, with prospects for further reductions over the upcoming three to six months. Market predictions suggest an 86% chance of a 25-basis-point rate cut at the Fed's policy meeting in September, according to the CME FedWatch Tool.
In a low-interest-rate environment, non-yielding gold typically outperforms, making it an attractive investment option for many. Investors are currently eagerly anticipating the release of the Personal Consumption Expenditures (PCE) Price Index in the U.S., the Fed's preferred measure of inflation, later in the day. This data will provide further insights into the Fed's future interest rate decisions.
Meanwhile, Fed Governor Lisa Cook made headlines on Thursday by filing a lawsuit against U.S. President Donald Trump, contesting his authority to remove her from office. In the broader precious metals market, spot silver experienced a slight decline of 0.6% to $38.82 per ounce, while platinum fell 1.2% to $1,343.80 and palladium was down 0.4% to $1,097.73.
Overall, the current economic landscape points towards positive momentum for gold prices, driven by a combination of factors including monetary policy expectations, currency fluctuations, and geopolitical developments. Investors will continue to closely monitor these dynamics to make informed decisions in the evolving market environment.
