Gold hovers near record high on US rate-cut expectations

Gold prices held firm near an all-time high on Monday (Sep 8), inching closer to a key US$3,600 level, bolstered by mounting expectations of a US Federal Reserve rate cut this month following a weaker-than-expected jobs report last week.

Spot gold was up 0.1 per cent at US$3,588.48 per ounce, as at 8.37 am. Bullion rose to a record high of US$3,599.89 on Friday.

US gold futures for December delivery fell 0.7 per cent to US$3,628.50.

US job growth weakened sharply in August and the unemployment rate increased to a nearly four-year high of 4.3 per cent, confirming that labour market conditions were softening and sealing the case for a Fed rate cut next week.

Several Fed officials last week noted that labour market concerns continue to animate their belief that rate cuts lie ahead. Fed governor Christopher Waller said that he believes the central bank should begin lowering rates at its next meeting.

Traders have fully priced in a 25-basis-point (bp) cut at the end of the two-day policy meeting on Sep 17, with an 8 per cent chance of a jumbo 50 bp rate cut, according to the CME FedWatch tool.

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Lower interest rates decrease the opportunity cost of holding non-yielding bullion and weigh on the US dollar, making gold cheaper for investors holding other currencies.

Focus now shifts to the US inflation report on Thursday that could offer more clarity on the size of the Fed’s expected rate cut.

China’s gold reserves stood at 74 million fine troy ounces at the end of August, up from 73.9 million at the end of July, as the central bank bought the precious metal for the 10th straight month.

Gold speculators raised net long positions by 20,740 contracts to 168,862 in the week ended Sep 2.

Elsewhere, spot silver eased 0.3 per cent to US$40.84 per ounce. Platinum fell 0.1 per cent to US$1,371.65 and palladium slipped 0.2 per cent to US$1,107.70. REUTERS