Gold edges up as investors await US-Russia meeting

Yahoo

2 days ago

Gold (GC=F)
Gold prices edged higher on Wednesday morning, buoyed by a softer US dollar following mild US inflation data that solidified expectations for an interest rate cut in September. Meanwhile, market participants looked ahead to this week's high-stakes talks between US and Russian officials regarding the ongoing war in Ukraine.
At the time of writing, gold futures rose 0.2% to $3,404.90 per ounce, while spot gold inched up by 0.1% to $3,357.03 per ounce.
"The fall in the USD enabled a moderate bounce in the gold price, with the precious metal oscillating around the $3,350 level ahead of the Trump-Putin meeting on Friday," said Tim Waterer, chief market analyst at KCM Trade.
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"If the meeting in Alaska doesn't resolve anything and the war in Ukraine continues, gold could be making a push back towards $3,400 once again," he added.
The uptick in gold came as US inflation data, released on Tuesday, showed a modest rise in the Consumer Price Index (CPI), which increased by 0.2% in July, following a 0.3% increase in June. Year-over-year, the CPI was up 2.7%, signalling that inflation pressures are cooling.
This data reinforced market expectations that the Federal Reserve may soon cut interest rates, which tends to boost demand for non-yielding assets like gold. The decline in the US dollar supported the precious metal's rise, as a weaker dollar makes gold more affordable for holders of other currencies.
Nikos Tzabouras, senior market analyst at Tradu.com, said: 'Gold is buoyant on heightened expectations of a September Fed rate cut, following benign CPI data and weak non-farm payrolls. This weighs on the US dollar, and a lower interest rate environment tends to favour non-yielding assets such as gold.
"In addition, the precious metal's safe-haven appeal could be swiftly reignited amid a fluid trade and geopolitical landscape, supporting higher prices. However, trade tensions have eased after the extension of the US–China tariff truce, while the geopolitical temperature has cooled ahead of the Trump–Putin meeting, which raises hopes for a Ukraine ceasefire.'
Oil (BZ=F, CL=F)
Oil prices were lower in early European trading, after industry data revealed an increase in US crude inventories, reinforcing expectations that the peak summer demand season is winding down.
Brent (BZ=F) crude futures lost 0.2% to trade at $65.16 per barrel, at the time of writing, while West Texas Intermediate (CL=F) futures retreated by 0.3% to $63.02 a barrel.
The US driving season typically runs from Memorial Day weekend in late May through early September, and with the end of summer approaching, demand is expected to taper off.
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Citing figures from the American Petroleum Institute (API), market sources reported that US crude stocks, in the world's largest oil consumer, rose by 1.52 million barrels last week. Gasoline inventories saw a decline, while distillate stocks experienced a slight increase.
Oil investors appeared to be in 'wait-and-see mode' ahead of the meeting between US president Donald Trump and Russian president Vladimir Putin, according to ING commodity strategists.
"The outcome could remove some of the sanction risk hanging over the market," the ING strategists added.
Pound (GBPUSD=X, GBPEUR=X)
The pound was higher against the dollar on Wednesday morning and may climb even further as US inflation data reinforced expectations for a Fed rate cut in September. Sterling was up 0.3% to $1.3543 at the time of writing.
The US Consumer Price Index (CPI) showed a year-over-year increase of 2.7% in July, matching the previous month's rise and coming in slightly below the anticipated 2.8% gain. Meanwhile, the core CPI, which excludes volatile food and energy prices, rose 3.1% in July, higher than the 2.9% increase seen in June and surpassing the consensus forecast of 3%.
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With these figures in hand, markets are pricing in around a 94% probability of a Fed rate cut at the September meeting, up from 86% just a day earlier, according to the CME FedWatch tool. Fed governor Michelle Bowman had already signalled last week that three interest rate cuts could be on the horizon for the remainder of the year.
The US dollar index (DX-Y.NYB), which measures the greenback against a basket of six currencies, was down 0.3% to 97.81.
Elsewhere in currencies, the pound was steady against the euro, trading at €1.1565 at the time of writing.
In equities, the FTSE 100 (^FTSE) was higher on Wednesday morning, up 0.4% to 9,182 points.