Gold holds below record with Fed rates outlook and data in focus

by Sybilla Gross

Gold held just below an all-time high, as traders weighed positive US economic data and outlooks from Federal Reserve officials on the path for interest rates.

Bullion was steady near $3,742 an ounce — about $50 shy of the record set on Tuesday. Prices fell on Wednesday after data showed new-home sales in the US unexpectedly surged in August to the fastest pace since early 2022, easing some concerns about a slowdown in the world’s biggest economy.

Investors were also digesting comments from US officials, with Treasury Secretary Scott Bessent on Wednesday expressing disappointment that Fed Chair Jerome Powell hasn’t clearly established an agenda for cutting rates. Earlier this week, the head of the US central bank reiterated the need to take a cautious approach amid signs of a weakening labor market and the risk of higher inflation. Lower rates tend to benefit precious metals, which don’t pay interest.

Gold and silver have been among this year’s best-performing major commodities on a broad confluence of supportive factors, including last week’s Fed rate cut, as well as robust central-bank demand. On Tuesday, prices climbed as much as 1.2% to a peak at $3,791.10 an ounce, after Bloomberg News reported China has plans to become a custodian of foreign sovereign bullion reserves.

Bullion has also seen strong demand from exchange-traded funds, with inflows hitting a three-year high on Friday. So far this year, bullion-backed holdings have risen every month apart from May, expanding by 400 tons, according to data compiled by Bloomberg.

Looking ahead, traders will focus on the US personal consumption expenditures price index that’s due on Friday. The Fed’s preferred measure of underlying inflation likely grew at a slower pace last month, which would boost the argument for rate cuts.

“Softer inflation could strengthen the case for Fed rate cuts, supporting bullion, with markets pricing two cuts this year,” Kaynat Chainwala, analyst at Kotak Securities Ltd., said in a note on Thursday. 

Spot gold was little changed at $3,742.32 an ounce at 8:07 a.m. in London. The Bloomberg Dollar Spot Index edged lower. Palladium, platinum and silver all rose. 

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