Gold prices climbed on Wednesday, driven by growing expectations of an interest rate cut by the U.S. Federal Reserve in September. The surge came after the release of mild inflation data and a dip in the dollar's strength, boosting demand for the precious metal.
Spot gold saw a 0.6% increase, reaching $1,363.61 per ounce by 1026 GMT, while U.S. gold futures for December delivery rose 0.5% to $1,414.10.
Analysts at UBS noted that recent comments by U.S. Treasury Secretary Bessent have sparked debate among market participants about the possibility of a 50 basis point rate cut at the Fed's September meeting. This discussion is further supported by incoming U.S. economic data indicating the need for monetary policy adjustments.
With July's marginal inflation rise suggesting minimal impact from U.S. import tariffs on consumer prices, markets are now pricing in a more than 96% chance of a Fed rate cut next month, with the potential for further reductions by the end of the year.
Gold, known as a safe haven asset often sought during times of economic uncertainty, tends to perform well in a low-interest-rate environment. The weakening dollar, as indicated by the dollar index, has also made gold more appealing for overseas buyers.
While geopolitical events, such as talks between Europe, Ukraine, and the U.S., may trigger short-term volatility in the gold market, prices are expected to remain stable until there is clearer support for a faster rate cut cycle based on U.S. economic data.
In the midst of escalating trade tensions, the U.S. and China have extended their tariff truce by 90 days, preventing additional duties on each other's products. This move has provided some relief to investors amid the ongoing trade dispute.
Alongside gold, other precious metals also experienced gains, with spot silver rising 1.7% to $38.53 per ounce, platinum up 0.7% at $1,345.89, and palladium increasing 0.5% to $1,135.45.
Overall, the gold market is carefully monitoring economic indicators and geopolitical developments for any potential impact on prices in the coming weeks.
