Gold prices stabilize as market awaits Fed interest rate decision
(MENAFN) Gold prices steadied on Monday following a 1 percent decline in the previous session. This drop was triggered by U.S. inflation data that indicated the Federal Reserve might opt for a smaller interest rate cut than initially anticipated this month. Spot gold remained stable at USD2,502.89 per ounce by 0015 GMT, after reaching a session low of USD2,494.15 on Friday. Despite this recent volatility, gold prices recorded overall gains for the month of August. Meanwhile, U.S. gold futures experienced a slight increase, rising 0.3 percent to reach USD2,535 per ounce.
The stabilization in gold prices came after U.S. economic data released on Friday showed stronger-than-expected consumer spending for July. This data contradicted market expectations of a more significant rate cut, such as a half-percentage point reduction. The personal consumption expenditures (PCE) price index rose by 0.2 percent in July, aligning with economists' expectations and following an unrevised 0.1 percent gain in June. As gold is a non-yielding asset, its attractiveness typically increases in a low-interest-rate environment, hence the market's focus on the Federal Reserve's next policy moves.
As traders await the Federal Reserve's upcoming policy meeting on September 17-18, market sentiment is leaning towards the likelihood of a modest 25 basis point rate cut, with a 67 percent probability, according to the CME FedWatch tool. There is also a 33 percent chance of a more substantial 50 basis point cut. Among other precious metals, spot silver edged up by 0.2 percent to USD28.89 an ounce, platinum remained relatively unchanged at USD926.80 an ounce, and palladium rose slightly by 0.3 percent to USD968.18 an ounce, reflecting a cautious but optimistic stance in the precious metals market.
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