NEW YORK: Gold prices eased yesterday but hovered near a more than one-month high scaled in the previous session, after softer US data boosted expectations of an interest rate cut by the Federal Reserve (Fed) in September.
Spot gold was down 0.2% at US$2,385.88 per ounce after rising to its highest level since May 22 last Friday. US gold futures eased 0.1% to US$2,394.50.
Data last Friday showed that the unemployment rate hit a 2½-year high of 4.1%, pointing to a slackening labour market.
Market focus this week is on Fed chair Jerome Powell’s semi-annual Congressional testimony, comments from a series of Fed officials and US inflation data.
Last Friday’s weak jobs report helped gold prices enjoy best week in three months, a soft US inflation report and a dovish tone from Powell when he testifies looks like the ideal catalyst for gold to consider new highs, said Matt Simpson, a senior analyst at City Index.
Markets are expecting a 78% chance of a September rate by the Fed, according to CME’s Fedwatch Tool. Traders are also pricing in a rising chance of a second rate cut in December.
Lower rates will reduce the opportunity cost of holding non-yielding bullion.
Bullion prices were capped by news that top consumer China’s central bank refrained from gold purchases to its reserves for a second consecutive month in June.“China may have paused its gold purchases, but it remains in demand overall. And that is likely to keep gold on bullish watchlists and tempt bullish bets upon any dips,” Simpson said. — Reuters
