Spot Gold eased but held close to an all-time high of $3,673.95/oz. on Thursday, supported by investor expectations of a Federal Reserve interest rate cut this month and ahead of the key US CPI inflation report.
Annual headline consumer inflation in the US probably picked up to 2.9% in August from 2.7% in July, according to market consensus.
And, annual core CPI inflation probably steadied at 3.1% in August.
The most recent data showed US producer prices had surprisingly dropped in August due to lower trade services margins, which added to rate cut prospects.
Markets are now pricing in about a 92% chance of a 25 basis point Fed rate cut next week and an 8% chance of a super-sized 50 basis point cut.
Lower interest rates tend to reduce the opportunity cost of holding Gold, which pays no interest.
“Gold seems to be consolidating recent gains as markets wait for U.S. Consumer Price Index data and what it’ll mean for Fed rate cut expectations,” Ilya Spivak, head of global macro at Tastylive, was quoted as saying by Reuters.
“The trend points higher, but a hot CPI report may boost the dollar, hurt gold prices in the short term, forcing a pullback. Losses may be limited however as markets are unlikely to abandon rate cut bets even if they push them further out along the timeline.”
Spot Gold was last down 0.41% on the day to trade at $3,625.66 per troy ounce.
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