Gold Prices Plummet Over 1% Following US Inflation Data Release
POLICY WIRE — New York, USA — Gold prices continued to decline on Wednesday following the release of US inflation data that largely aligned with forecasts. This development heightened expectations of...
POLICY WIRE — New York, USA — Gold prices continued to decline on Wednesday following the release of US inflation data that largely aligned with forecasts. This development heightened expectations of a Federal Reserve interest rate increase next month. Investors are also anticipating remarks from Chairman Kevin Warsh later this week.
Spot gold experienced a 1.4% decrease, settling at $4,592.97 per ounce after reaching its highest point since May 14 on Tuesday. US gold futures saw a 0.9% drop, closing at $4,653.30.
The dollar strengthened by 0.3%, making gold, which is priced in greenbacks, more costly for holders of other currencies.
Peter Grant, vice president and senior metals strategist at Zaner Metals, noted, Gold’s price movement up to today’s data was merely some profit-taking. The PCE data came in largely in line with expectations, so we’re consolidating within yesterday’s range at this point.
The Personal Consumption Expenditures Price Index, utilized by the Fed to establish its inflation target, rose by 3.7% over the 12 months through July, according to the Commerce Department’s Bureau of Economic Analysis. This figure slightly exceeded the 3.6% forecast by economists polled by Reuters.
Market participants now assign a 38% probability to a rate hike next month, up from 36% prior to the data release. They also price in a 62% chance that the Fed will maintain current rates, as indicated by the CME FedWatch Tool.
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Gold, which does not yield interest, typically loses its allure in a high-interest-rate environment.
Grant expressed optimism about gold’s future, stating, I believe the upward trend in gold is starting to reassert itself. Therefore, I see potential for it to surpass $5,000 this year. He further added that there is a possibility for gold to achieve new all-time highs by the second quarter of 2027.
On the geopolitical front, Iran and Oman have reached an agreement regarding their share of the Strait of Hormuz and its revenues. However, the crucial waterway will remain closed unless the US accepts their conditions, according to Iran’s Revolutionary Guards.
Reporting by Policy-Wire (PW)
