Gold Soars 0.88% as Inflation Cools Rate Cut Hopes Ignite

Gold prices surged 0.88% as core PCE inflation remained steady but showed signs of cooling. The market is optimistic about a potential rate cut by the Federal Reserve, boosting gold’s appeal as a safe-haven asset. This positive sentiment comes amid a stable U.S. economy with neutral inflation.

CONTENTS: Gold Soars 0.88% as Inflation Cools Rate Cut 

• Gold prices rise on expected rate cut.
• Gold gains on cooling inflation, rate cut hopes.

Gold prices rise on expected rate cut

Gold Soars 0.88% as Inflation Cools Rate Cut

The gold market is gaining strong momentum, trading near session highs, as U.S. inflation pressures align with expectations. Some analysts suggest this situation provides the Federal Reserve with the opportunity to lower interest rates by the end of the quarter.

On Friday, the U.S. Department of Commerce reported that its core Personal Consumption Expenditures (PCE) price index rose by 0.2% last month, matching May’s increase of 0.2%. This data met expectations.

Over the past year, core PCE inflation increased by 2.6%, consistent with May’s figure. This annual inflation rate is slightly higher than anticipated, as economists had predicted 2.5%.

Despite the latest inflation data, expectations regarding the Federal Reserve’s monetary policy remain unchanged. The markets continue to fully anticipate a rate cut in September.

Paul Ashworth, Chief North America Economist at Capital Economics, noted, “The 12-month annual core inflation rate remained steady at 2.6%, but the three-month annualized rate decreased to 2.3% from 2.9%. The Fed will be reassured by core services excluding housing, which rose by 0.18% month-over-month last month after a 0.17% gain in May. This indicates that the rebalancing of the labor market is having a more significant downward effect on labor-intensive services components.”

The gold market responded positively, trading near session highs following the data release. August gold futures were last at $2,374.40 per ounce, up 0.88% for the day.

Although core inflation remains steady, overall inflation is declining. In June, headline PCE rose by 0.1%, compared to a flat reading in May. Annual inflation rose 2.5%, down from 2.6%.

With neutral inflation, the U.S. economy appears to be in a holding pattern, with consumption remaining fairly stable.

The report also indicated that personal income rose by 0.2% last month, down from a 0.5% increase in May, and weaker than the expected 0.4% increase.

Meanwhile, personal consumption rose by 0.3%, up from the previous month’s increase of 0.2%, aligning with expectations.