A weaker dollar is driving gold higher after inflation data almost nailed on a rate cut by the Federal Reserve in September.
Interest rate traders are now pricing a full 25 bps cut in September, while some politicians are calling for a 50 bps cut.
“In short, the dovish repricing of Fed policy expectations continued, as the USD OIS curve now more than fully prices a 25bp cut next month, in turn posing a continued headwind to the greenback, putting a bid into front-end Treasuries, and seeing equities extend gains too,” explained Michael Brown Senior Research Strategist at Pepperstone.
Gold has resumed a steady incline as traders price in an interest rate cut in September in the face of disruption in the US jobs market and inflation that shows little sign of Donald Trump’s tariffs.
“Gold posted a modest rebound for the second consecutive session, closing yesterday’s trading around $3,355/oz as market sentiment was bolstered by expectations that the Federal Reserve (Fed) will begin cutting interest rates in September,” said Linh Tran, Market Analyst at XS.com.
“The weakening U.S. dollar and a slight decline in U.S. Treasury yields have increased gold’s appeal as an alternative store of value. This reflects growing confidence that monetary policy will shift toward easing, thereby creating a more favorable environment for non-yielding assets such as gold.”