Gold price erases weekly loss as market digests new US data

Gold rose over 1% on Friday after fresh US inflation data cemented the prospects of more interest rate cuts this year, while safe-haven demand stemming from geopolitical tensions also lifted bullion.

Spot price gained 1.1% to $2,659.98 per ounce by 12:30 p.m. ET, erasing a weekly decline that followed last month’s record-breaking rally. US gold futures were up 1.4% to $2,677.70 per ounce in New York.

A measure of prices paid to US producers was unchanged in September, pointing to a still-favorable inflation outlook and supporting expectations of Fed rate cut next month. In addition, US consumer sentiment unexpectedly fell for the first time in three months due to high cost of living.

“The PPI numbers leaned friendly for the precious metals market bulls and suggest the Fed remains on track for two quarter-point interest rate cuts this year,” Jim Wyckoff, senior market analyst at Kitco Metals, told Reuters.

Mixed economic readings

The readings added to a batch of mixed US economic data released this week.

On Thursday, it was revealed that US consumer prices rose slightly more than expected last month, but the annual increase in inflation was the smallest in more than three and a half years.

Traders are now becoming less uncertain that the US central bank will need to deploy further monetary easing this year. Traders are pricing in roughly 20% odds that the Fed holds rates steady in either November or December.

However, Fed policymakers John Williams, Austan Goolsbee and Thomas Barkin were unfazed by a higher-than-forecast September inflation report on Thursday, suggesting officials can continue lowering rates.

“The economy is still relatively strong, and the Fed is still in a paradox where they’re looking at cutting rates because some sectors have slowed down significantly, like housing,” Daniel Pavilonis, senior market strategist at RJO Futures, said.

Despite uncertainty surrounding rate cuts, bullion should continue to gain support due to the geopolitical tensions in the Middle East. This, combined with inflation concerns and US election uncertainties, is expected to drive gold prices to $3,000 by next year, according to Pavilonis.

Driven by these forces, gold has rallied more than 25% in 2024, making it one of the best-performing commodities of the year.

(With files from Bloomberg and Reuters)