Gold inches higher as soft US PPI data fuels rate cut bets; CPI in focus

The US Federal Reserve is expected to cut interest rates at its policy meeting next Wednesday

Gold edged up on Thursday (Sep 11), as softer-than-expected US producer price index (PPI) data reinforced already strong expectations for a US Federal Reserve interest rate cut next week, while investors awaited key consumer inflation data for further cues.

Spot gold was up 0.1 per cent at US$3,645.04 per ounce, as at 8.44 am. Bullion hit a record high of US$3,673.95 on Tuesday.

US gold futures for December delivery rose 0.1 per cent to US$3,682.90.

US producer prices unexpectedly fell in August due to lower trade services margins and modest increases in goods costs.

Investors are now focused on the US Consumer Price Index (CPI) data, with a Reuters poll forecasting a 0.3 per cent monthly increase in August after a 0.2 per cent rise in July. CPI is expected to have grown 2.9 per cent year-on-year, compared with 2.7 per cent in July.

The US Federal Reserve is expected to cut interest rates at its policy meeting next Wednesday, with a quarter-percentage-point reduction fully priced in, while investors anticipate a slim possibility of a 50-basis-point cut, as per the CME FedWatch tool.

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Last week’s weaker-than-expected nonfarm payrolls report, which pointed to a cooling labour market, further strengthened expectations of monetary easing.

Gold, which does not yield interest, tends to perform well in low-interest-rate environments.

Meanwhile, on Wednesday, the US President Donald Trump’s administration appealed a federal judge’s ruling that temporarily blocked the dismissal of Fed governor Lisa Cook.

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Elsewhere, spot silver was steady at US$41.13 per ounce. Platinum gained 0.5 per cent to US$1,392.55 and palladium rose 0.7 per cent to US$1,181.56. REUTERS