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Gold tries to recover before Fed minutes
AI Summary
- Gold prices rose in European market, trying to recover from three-week low, but remain capped by strength in US dollar ahead of Federal Reserve's meeting minutes
- US dollar index rose, reaching one-week high, as markets focus on Fed Chair Jerome Powell's speech at Jackson Hole for potential pushback against expected rate cut next month
- Probabilities for rate cut in September and October are high, with investors closely watching Fed minutes and Powell's upcoming remarks for further direction on gold market
Gold prices rose in the European market on Wednesday, attempting to recover from a three-week low recorded earlier in Asian trading, supported by bargain hunting at lower levels.
However, the recovery remains capped by strength in the US dollar, which is being bought as the preferred safe-haven investment ahead of the release of the Federal Reserve’s latest meeting minutes.
The Price
•Spot gold rose 0.35% to $3,327.65, up from the session’s opening level of $3,315.84, after touching an intraday low of $3,311.58, the weakest level since August 1.
•At Tuesday’s settlement, gold lost 0.5%, marking its second straight daily decline under pressure from a stronger US dollar and higher US bond yields.
The US Dollar
The dollar index rose 0.15% on Wednesday, extending gains for a third consecutive session and reaching a one-week high of 98.44, reflecting continued strength in the US currency against a basket of major and minor counterparts.
Markets now turn their attention to Fed Chair Jerome Powell’s speech on Friday at Jackson Hole, where traders are looking for any pushback against market pricing of a rate cut next month.
US Interest Rates
•According to CME’s FedWatch Tool, the probability of a 25 basis-point rate cut in September is currently priced at 83%, with a 17% chance of no change.
•For October, probabilities are priced at 92% for a 25 basis-point cut and 8% for no change.
•Investors are closely watching the Fed minutes due later today and comments from policymakers to reassess these expectations, alongside Powell’s upcoming remarks at Jackson Hole.
Gold Outlook
Kelvin Wong, market analyst at OANDA for Asia-Pacific, said the stronger US dollar and improved risk appetite following recent geopolitical developments are weighing on gold, with markets awaiting Powell’s remarks at Jackson Hole for further direction.
SPDR Gold Trust
Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell by 3.16 metric tons on Tuesday, bringing the total down to 962.21 metric tons. This compares with 965.37 metric tons, the highest level since September 9, 2022.
UK inflation hits 17-month peak
The UK economy released its annual headline CPI on Wednesday, showing a rise of 3.8% in July, the fastest pace since January 2024. This came in above market expectations of a 3.7% increase, and also higher than the previous reading of 3.6%.
MoreSterling hits one-week trough before UK inflation data
The British pound declined in European trading on Wednesday against a basket of major currencies, deepening losses for the third consecutive session against the US dollar and hitting a one-week low. The drop came amid continued strength in the greenback ahead of the annual Jackson Hole Economic Symposium.
MoreKiwi extends losses to four-month trough on cautious RBNZ stance
The New Zealand dollar fell broadly in Asian markets on Wednesday against a basket of major and minor currencies, extending losses for the second consecutive day against its US counterpart and hitting a four-month low. The decline came amid accelerating open-market selling following the release of the Reserve Bank of New Zealand’s monetary policy decision.
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