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Gold little changed as dollar gains, Fed rate cut bets lend support

Gold prices inched up on Thursday following a sharp rise in the last session as the dollar and bond yields weakened on the increasing likelihood of rate cuts by the U.S. Federal Reserve as early as September.

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Gold was little changed on Thursday as the dollar rebounded, although signs of cooling U.S. inflation cemented hopes for interest rate cuts from the Federal Reserve this year and kept bullion near one-month peak.

Spot gold was down about 0.1% to $2,383.22 per ounce as of 1645 GMT, after hitting its highest since April 19 earlier in the session. Bullion rose more than 1% on Wednesday.

Meanwhile, U.S. gold futures eased 0.3% to $2,388.

The “gold market is seeing some routine profit taking pressure by the short term futures traders after the recent gains, while the firmer U.S. Dollar Index today is also adding to that pressure,” said Jim Wyckoff, senior analyst at Kitco Metals.

The dollar rose 0.1% against its rivals after hitting a multi-month low Wednesday after data showed U.S. consumer prices rose less than expected in April.

A stronger dollar makes gold more expensive for other currency holders.

Meanwhile, Fed Bank of New York President John Williams said that positive news around cooling inflation is not enough to call for the U.S. central bank to soon cut interest rates. Lower interest rates reduce the opportunity cost of holding non-yielding gold.

Market participants are pricing in a roughly 68% chance that the Fed will cut rates in September, according to the CME FedWatch tool.

“Weaker U.S. dollar, declining U.S. Treasury yields as well as elevated geopolitical tensions offered support to gold over the past week and we expect gold prices to stay above $2,250/oz in the coming months,” Fitch Solutions analysis unit BMI said in a note.

Spot silver was steady at $29.72 an ounce, having hit its highest since February 2021 earlier in the session.

Palladium lost about 1.8% to $991.60, while platinum fell 0.5% to $1,058.55 after hitting a one-year high earlier in the session.

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