Gold Slips as Dollar Firms, Rate Cut Hopes Lend Support

Reuters

Islamabad: Gold eased from a near two-week high on Monday as the dollar strengthened, though expectations of US interest rate cuts following Federal Reserve Chair Jerome Powell’s dovish remarks last week helped limit losses.

Spot gold was down 0.1 percent at $3,367.86 per ounce at 0632 GMT, after hitting its highest level since August 11 on Friday. The US dollar index rose 0.1 percent after dropping to a four-week low, making bullion less attractive for overseas buyers.

“Support for gold is seen around $3,350 in the near term, with Powell’s dovish hints allowing gold to carve out a prominent swing low on Friday,” said Matt Simpson, senior analyst at City Index. “A sustained rally likely requires softer PCE inflation and weaker employment data. But with inflation expected to remain elevated, gold’s gains could remain capped.”

Powell on Friday signaled the possibility of a rate cut at the Fed’s meeting next month, noting rising risks to the job market while warning inflation pressures persist. Markets are now pricing in an 87 percent chance of a quarter-point cut in September and a cumulative reduction of 48 basis points by year-end, according to the CME FedWatch Tool.

Gold typically benefits in a low-interest-rate environment, which reduces the opportunity cost of holding the non-yielding asset.

Asian share markets rallied on Monday on optimism over potential U.S. rate cuts. Investors now await Friday’s U.S. personal consumption expenditures (PCE) data, expected to show core inflation edging up to 2.9 percent, the highest since late 2023.

In other precious metals, spot silver rose 0.3 percent to $38.94 per ounce, platinum slipped 0.2 percent to $1,359.66, while palladium was steady at $1,126.41.