Gold prices experienced a slight uptick on Thursday, building on a notable surge in the previous session. This movement comes as the U.S. dollar and bond yields softened, fueled by growing expectations of rate cuts by the Federal Reserve as early as September.
As of 0255 GMT, spot gold rose by 0.1% to reach $2,388.10 per ounce, following a more than 1% surge on Wednesday, marking its highest level since April 19. Similarly, U.S. gold futures edged up by 0.1% to $2,393.20.
The dollar declined by 0.2% against a basket of major currencies, rendering gold, priced in greenbacks, more affordable for holders of other currencies. Meanwhile, the benchmark 10-year Treasury yield hit its lowest point in over a month.
Tim Waterer, chief market analyst at KCM Trade, remarked, “Following the April consumer price index data, the odds for a potential September rate cut have firmed, which suits the gold price from a yield perspective.” He further noted, “With inflation coming off the boil, gold is effectively making hay while the sun is shining and looks poised to capture the $2,400 level. However, a potential bounce in the dollar or treasury yields could be the biggest hurdle for gold price in the remainder of the week.”
The cooling U.S. consumer prices, combined with last week’s lackluster jobs report and a softer-than-anticipated U.S. payrolls report for April, have been perceived positively by Fed policymakers, who are keen on witnessing renewed progress on inflation before considering reducing borrowing costs.
While gold is typically viewed as an inflation hedge, higher rates amplify the opportunity cost of holding non-yielding assets like gold.
Chicago Federal Reserve Bank President Austan Goolsbee expressed optimism regarding a continued decline in inflation, echoing sentiments shared earlier in the week by Fed Chair Jerome Powell, who remarked that it was improbable for the central bank to raise interest rates again.
In contrast to gold’s movement, spot silver experienced a 0.5% decline to $29.56 per ounce, while palladium saw a modest gain of 0.3% to $1,012.93.
Platinum registered a 0.7% increase, reaching $1,071.00, marking its highest level since May 22 of the previous year.
