Gold prices fall as dollar strength, expected inflation report affect market

(MENAFN) Gold prices experienced a decline on Wednesday, influenced by a stronger U.S. dollar, as investors awaited a crucial U.S. inflation report set to be released later in the week. Spot gold prices fell by 0.7 percent, settling at USD2,507.64 per ounce as of 0531 GMT. This decrease follows the precious metal's recent peak of USD2,531.60 reached on August 20. Similarly, U.S. gold futures saw a decline of 0.4 percent, trading at USD2,542.80 per ounce. The rise in the dollar index by 0.3 percent diminished gold's appeal for holders of other currencies, further contributing to the drop in gold prices.

Market sentiment is currently focused on the potential implications of the upcoming U.S. personal consumption expenditure (PCE) data, which is the Federal Reserve's preferred measure of inflation. This report, scheduled for release on Friday, could provide insights into the size of a potential interest rate cut by the Federal Reserve in September. Kelvin Wong, senior market analyst for Asia-Pacific at OANDA, noted that the market is awaiting a significant trigger that could push gold prices above the recent high of USD2,532. Wong suggested that while gold may see strong short-term trends with potential for new all-time highs, it could encounter resistance in the USD2,585-USD2,595 range in the longer term.

Last week, Federal Reserve Chairman Jerome Powell indicated support for an imminent reduction in interest rates and expressed optimism about achieving the bank's inflation target of 2 percent. This expectation has added to market anticipation, as participants closely monitor how the upcoming inflation data might influence monetary policy and impact gold prices.

MENAFN28082024000045015682ID1108609885