In European trade on Wednesday, gold prices faced a second consecutive day of decline, coming perilously close to a three-week low. The downward pressure on gold can be attributed to the resurgent strength of the US dollar against major global currencies.
This decline in gold prices comes just ahead of the eagerly anticipated release of crucial US inflation data later today. These figures are of utmost importance as they will provide significant insights into the future trajectory of interest rates.
Current Gold Prices
The price of gold experienced a decline of 0.3%, settling at $1,908 per ounce, with the session’s peak reaching $1,913.88. This decline follows a 0.4% drop recorded yesterday, which brought gold to a three-week low of $1,907 per ounce. The surge in global oil prices has also contributed to this decline, potentially prompting central banks to further implement their policy tightening measures.
The US Dollar’s Role
The US dollar index demonstrated a 0.2% rise, marking another session of gains against a basket of major currencies. This surge in the dollar’s value correlates with the recent spike in oil prices, reaching ten-month highs. This spike follows the decisions made by Saudi Arabia and Russia to extend voluntary production cuts, a development that is anticipated to lead to an increase in consumer prices in the US, potentially necessitating further interest rate hikes by the Federal Reserve later in the year.
The Federal Reserve’s Stance
The Federal Reserve has consistently emphasized its willingness to raise interest rates in response to an acceleration in inflation. As the September policy meeting approaches, Federal Reserve policymakers have made it clear that they do not intend to raise interest rates this month.
US Interest Rate Probabilities
Currently, the odds of a 0.25% interest rate hike by the Federal Reserve in September stand at a modest 7%. However, the probability of such a hike at the November meeting appears stronger, with odds resting at 42%.
Awaiting US Inflation Data
Investors are eagerly awaiting the release of US inflation data for August, which will significantly influence the future direction of US interest rates. Projections indicate an expected rise of 3.6% in consumer prices for August, up from 3.2% in July. Core prices, excluding volatile food and energy components, are anticipated to increase by 4.3%.
SPDR Gold Holdings
Gold holdings at the SPDR Gold Trust remained stagnant as of yesterday, totaling 884.89 tonnes. This figure marks the lowest level since August 24, reflecting the current sentiment surrounding gold in the wake of impending economic data and market dynamics.
