Gold futures have suffered a setback after six consecutive days of gains and record highs. The precious metal’s reversal came despite a weaker dollar and the latest US inflation data showing a continued decline. Profit-taking was the main driver of gold’s price volatility.
As of 5:30 a.m. (US time), the most active December gold futures contract closed at $2,680.8 an ounce, down $14.3 an ounce, or 0.53%.
Despite the daily decline, gold still posted a strong weekly gain of $33.70, or 1.27%, while the dollar index fell to 100.489, marking a 0.12% daily decline and a 0.31% weekly decline.
According to Kitco - data released by the US Commerce Department on Friday showed that the core personal consumption expenditures (PCE) price index, which excludes volatile food and energy prices, rose slightly by 0.1% in August, lower than the expected increase of 0.2%.
The Federal Reserve's preferred inflation measure rose 2.7% last month after three straight months of 2.6%. Annual core PCE inflation was in line with expectations, with economists forecasting a 2.7% increase. On the year, inflation rose 2.3%, down from 2.5% in July.
This PCE report supports the recent 50 basis point rate cut by the US Federal Reserve (FED) and reinforces confidence in the central bank's ongoing efforts to normalize interest rates from the current range of 4.75% to 5%.
The CME FedWatch tool shows a 45.9% chance of a 25 basis point rate cut at the Fed's next meeting, with a higher 54.1% chance of another 50 basis point cut in November.
Recent interest rate cuts, coupled with expectations of further cuts globally, create a favorable environment for gold prices. Lower interest rates reduce the opportunity cost of holding assets like gold.
Despite the decline in gold, the combination of a weaker US dollar, falling inflation and dovish central bank policies around the world reinforces the positive long-term outlook for gold.
Recorded at 9:07 a.m. on September 28, 2024 (Vietnam time), the world gold price listed on Kitco was at 2,658.5 USD/ounce.
At the same time, the US Dollar Index, which measures the greenback's fluctuations against six major currencies, was at 100.150 points (down 0.1%).
