Gold Edges Higher on Softer US Inflation Data
Gold prices rose on Thursday after a US inflation report showed softer-than-expected price growth, reducing expectations of a Federal Reserve rate hike this month.
The data, released on Wednesday, indicated that US inflation rose less than expected in August and that price pressures were revised lower for the prior month. This tempered expectations of a rate hike in October, with markets pricing in a 38% chance, down from 45% before the release.
Despite this, traders still see a 97% probability of an increase in December, which would be driven by higher interest rates that reduce the appeal of gold. Gold does not pay interest, and a stronger dollar also limits gains for the metal.
Ilya Spivak, head of global macro at Tastylive, said that incoming data will be important to see how the market deals with it and shapes rate-hike expectations. The US nonfarm payrolls report for September is scheduled for release on Friday, which could further impact rate hike expectations.
Bart Melek, global head of commodity strategy at TD Securities, believes that all of gold's 'September losses are unlikely to be recovered, but there are reasons to believe that the worst of the correction is over for now and that there is a case for higher prices.'