Gold set for weekly drop as US data dims large Fed rate cut hopes

CNBC

a day ago

Gold prices were headed for a weekly fall on Friday, as hotter-than-expected U.S. inflation data dented hopes for a super-sized 50-basis-point (bps) Federal Reserve rate cut in September.
Spot gold rose 0.1% to $3,339 per ounce as of 0244 GMT. Bullion has lost 1.8% for the week. U.S. gold futures for December delivery were flat at $3,384.
"Gold is still grappling with the aftermath of the PPI jump, which raised questions over just how far the Fed may be inclined to reduce rates this year," said Tim Waterer, chief market analyst at KCM Trade.
U.S. producer prices index (PPI) rose 3.3% year-on-year in July, beating forecasts of a 2.5% gain, Labor Department data showed on Thursday. Weekly jobless claims came in lower than expected at 224,000 versus estimates of 228,000.
Separately, U.S. consumer prices increased only marginally in July, bolstering hopes of a Fed rate cut.
However, the hotter-than-expected PPI reading tempered hopes for an aggressive easing cycle, making it less likely that the Fed would opt for a 50 bps reduction at its next meeting.
"If this spike in wholesale prices turns into a trend which then translates into CPI gaining pace, expectations for US rate cuts could be scaled back, which may hinder gold's performance from a yield perspective," Waterer said.
St. Louis Fed President Alberto Musalem said a half-point rate cut in September was not warranted, a day after Treasury Secretary Scott Bessent said it was possible.
Non-yielding gold thrives in a low-interest-rate environment.
On the geopolitical front, investors are downplaying the chances of a major breakthrough on ending the war in Ukraine from Friday's meeting between Donald Trump and Vladimir Putin, despite some signs of progress.
Elsewhere, spot silver eased 0.2% to $37.91 per ounce, platinum fell 0.2% to $1,354.94 and palladium lost 0.3% to $1,142.51.