Gold prices rose on Tuesday, buoyed by a weakening U.S. dollar as investors turned their focus to upcoming inflation data. This data could provide clues about the Federal Reserve’s potential interest rate cut next month.
Current Market Movements
Spot gold increased by 0.3%, reaching $2,524.94 per ounce by 2:57 p.m. ET (1857 GMT), just below last week’s record high of $2,531.60. Meanwhile, U.S. gold futures settled slightly lower, down 0.1% at $2,552.90.
The dollar index, which measures the greenback against a basket of other currencies, fell by 0.3%. This decline made gold more attractive to investors holding other currencies.
Strategists Weigh In
“The primary driver right now is the drop in the U.S. dollar over the last hour, which has provided a boost to gold prices,” said Bob Haberkorn, senior market strategist at RJO Futures. “We’re seeing a lot of buying activity on this dip.”
Focus on Inflation Data and Fed Guidance
Attention now turns to the upcoming release of the Personal Consumption Expenditures (PCE) data, set for Friday. This report is a key inflation measure and the Fed’s preferred gauge for assessing inflation trends.
Jim Wyckoff, senior market analyst at Kitco Metals, noted that a hotter-than-expected inflation report could influence the Fed’s policy decisions. However, he added that the market is confident that the Fed will cut interest rates in September, with a possibility of additional cuts later in the year.
Market Expectations and Investor Sentiment
According to the CME FedWatch tool, traders currently see a 63.5% likelihood of a 25-basis-point rate cut in September. There is also a 36.5% chance of a more substantial 50-basis-point reduction.
Gold continues to trade above the crucial $2,500 per-ounce level and is on track for its best performance since 2020. This rally has been fueled by investor optimism regarding potential U.S. rate cuts and ongoing concerns about the Middle East conflict.
Analysts’ Outlook on Precious Metals
“Much of the positive news for gold may already be priced in,” noted Commerzbank in a recent report. “We remain cautious, believing that gold has limited upside potential at this time. Instead, we see more room for gains in the three other precious metals that have lagged behind gold in recent weeks.”
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