Gold Rises as the Dollar Weakens on Expectations Around a Coming Cut to Interest Rates
Gold futures rose early on Friday as expectations for lower U.S. interest rates pushed the dollar down. Gold for December delivery was last seen up $15.70 to US$3,464.30 per ounce, the highest since Aug. 8.
The rise comes as the dollar fell despite bullish U.S. economic data, as initial jobless claims fell by 5,000 last week to 229,000, just under expectations, while the Bureau of Economic Analysis' first revision to its estimate of second-quarter gross domestic product growth showed it rose by 3.3%, up from its initial 3% estimate.
Still expectations the Federal Reserve is turning dovish even as inflation continues to run above the central bank's 2% target is supporting gold prices. In a speech to the Fed's annual policy meeting last week, chair Jerome Powell said the bank is ready to move off its stand-pat policy as U.S. President's Donald Trump's tariffs begin to weigh on growth. While Powell gave no indication of when rates would be cut, the CME FedWatch tool shows an 85.3% probability for a 25 basis point cut at the Sept.17 end of the meeting of the Fed's policy committee, up from 75% a week ago.
Still, Friday's release of the July Personal Consumption Expenditures (PCE) Index, the Federal Reserve's preferred inflation measure, could affect the outlook for a cut. The consensus expectation is calling for the report to show an annualized rise of 2.6% according to Marketwatch, unchanged from June.
Concerns over the central bank's independence is also supporting safe haven demand for gold as Trump tries to fire Fed Governor Lisa Cook, who is refusing to depart.
"Worries over Fed independence and another drop in US Treasury yields-especially at the front end have supported bullion this week. Focus, besides the dollar and yields, is the broader risk appetite and how markets respond to signs of a maturing AI boom and Friday's PCE inflation print," Saxo Bank reported.
The dollar weakened early, with the ICE dollar index last seen down 0.3 points to 97.92. Treasury yields rose, with the U.S. two-year note last seen paying 3.649%, up 2.8 basis points, while the yield on the 10-year note was up 0.2 points to 4.241%.
Source : MT Newswires
