Gold softened on Friday as the dollar and Treasury yields firmed after U.S. inflation data matched expectations, but the bullion is set for a monthly gain as a September interest rate cut by the Federal Reserve remains in play.
Spot gold slipped 0.8% to $2,501.68 per ounce as of 12:03 p.m. ET (1603 GMT) and U.S. gold futures fell 0.9%to $2,535.10.
Bullion is on track for a 2% gain this month after prices rallied to an all-time high of $2,531.60 on Aug. 20.
Data earlier in the day from the Commerce Department showed the personal consumption expenditures (PCE) price index rose 0.2% last month, matching economists’ forecasts.
The PCE data confirms inflation is no longer the Fed’s main concern, as they have shifted their focus to unemployment, which further validates the potential rate cuts in September, said Alex Ebkarian, chief operating officer at Allegiance Gold.
Investors now look ahead to the U.S. non-farm payroll report due next week.
“Next week will solidify whether or not we have a 50- or 25-basis-point interest rate cut at the September meeting,” said Phillip Streible, chief market strategist at Blue Line Futures.
Traders slightly raised bets of a 25-basis-point rate reduction by the Fed next month to 69%, with a 50-bps cut possibility coming down to 31% following the inflation report, according to the CME FedWatch tool.
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Physical demand remained lacklustre is top Asian consumers as new import quotas failed to lift Chinese demand.
“Systematic trend followers are effectively max-long. We also think that Shanghai positioning is near its record highs. That is despite the fact that physical demand in China has been fairly weak and inflows from Chinese gold ETFs as well,” said Daniel Ghali, commodity strategist at TD Securities.
Downside risks are significantly more elevated in the near term, given the fact that positioning looks extremely stretched, Ghali said.
Spot silver eased 1.8% to $28.92 per ounce and platinum fell 0.9% to $928.42. Palladium retreated 1.5% to $964.75, but gained 4% so far this month.
