Gold poised for weekly fall as bets fade for big Fed rate cut

Gold was subdued on Friday and was heading for a weekly fall, as hotter-than-expected U.S. inflation data dented expectations for a super-sized 50 basis point U.S. interest rate cut in September.

FUNDAMENTALS

Spot gold was down 0.1% at $3,333.58 per ounce, as of 0120 GMT. Bullion has fallen 1.9% for the week. U.S. gold futures for December delivery eased 0.1% to $3,378.90.
The Labor Department reported the U.S. producer price index (PPI) rose 3.3% year-on-year in July, beating forecasts of 2.5% while weekly jobless claims were lower than expected at 224,000 versus 228,000 forecast.

This comes after data on Tuesday showed that U.S. consumer prices increased marginally in July, increasing chances of a Federal Reserve rate cut next month.

While Thursday’s hot PPI data did not dent chances of a Fed rate cut in September, it hurt the case for the Fed to resume cutting rates with a 50 bp reduction.

St. Louis Fed President Alberto Musalem on Thursday said a half-point rate cut at the Fed’s September meeting is not warranted, a day after Treasury Secretary Scott Bessent said it was possible. Non-yielding gold thrives in a low-interest-rate environment. Investors will next focus on whether Fed Chair Jerome Powell offers any fresh clues on policy at the U.S. central bank’s annual economic policy symposium in Jackson Hole, Wyoming, next week. On the geopolitical front, investors are tempering expectations that Friday’s summit between Donald Trump and Vladimir Putin will deliver a significant breakthrough on the war in Ukraine despite some hopeful sign.

SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings fell 0.30% to 961.35 metric tons on Thursday from 964.22 tons on Wednesday.

*Elsewhere, spot silver rose 0.2% to $37.89 per ounce, platinum fell 0.3% to $1,351.78 and palladium slipped 0.4% to $1,140.69. DATA/EVENTS (GMT) 0200 China Urban Investment (YTD)YY, Retail Sales YY July 0200 China Unemp Rate Urban Area July 1000 EU Reserve Assets Total July 1230 US Import Prices YY, Retail Sales MM July 1315 US Industrial Production MM July 1400 US U Mich Sentiment Prelim August