Gold Soars as US Economy Slows, Rate Hike Odds Collapse

A recent string of economic releases in the US has led to a significant shift in the outlook for interest rates, with the probability of a September rate hike now standing at just 31% according to the CME FedWatch tool. This marks a collapse from roughly 50% one month ago and is a direct result of weak consumer spending data and falling consumer confidence.

The US Census Bureau reported that retail and food services sales fell 0.6% in July, the largest monthly decline in over a year, while motor vehicle and parts dealers saw a decline of 1.8%. Consumer confidence also took a hit, with the University of Michigan's preliminary Consumer Sentiment Index falling to 51.0, well below expectations.

The combination of these weak economic data points has reduced the pressure on the Federal Reserve to raise interest rates, which in turn reduces the opportunity cost of holding gold. As a result, gold prices have been boosted, with the metal trading near $4,390 per ounce, up 0.9% on a rolling 24-hour basis.