Gold slips after rise in core inflation dims odds of a jumbo rate cut
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Spot gold was down 0.4 per cent to US$2,505.71 an ounce as at Sept 12, after peaking at a record US$2,531.75 in August.
PHOTO: UNSPLASH
NEW YORK – Gold fell after a key economic report showed underlying US inflation unexpectedly picked up in August as housing costs accelerated, lowering the possibility of an outsized Federal Reserve interest rate cut next week.
The so-called core consumer price index – which excludes food and energy costs – increased 0.3 per cent from July and 3.2 per cent from a year ago, Bureau of Labour Statistics figures showed on Sept 11. Economists see the core gauge as a better indicator of underlying inflation than the overall CPI.
Treasury yields pushed higher while the dollar pared early losses after the print, and bullion whipsawed in response before edging lower. Swap traders now nearly erased bets on a jumbo rate cut by the US central bank in September. Lower rates typically benefit non-interest yielding bullion.
Policymakers have said their focus is more on the risks to the labour market given price pressures have largely come down from their pandemic peak.
The pickup in core price pressures in August means “the number of cuts may come down going forward,” said Phil Streible, chief market strategist at Blue Line Futures. For gold traders, “it’s all about the path and making the journey very long, and all of a sudden we get less cuts out there in 2025, that’s slightly problematic for the gold market”.
With bullion trading near all-time highs, “it’s been very complacent recently. Traders are slightly nervous, so they’re eager to take profits to exit the market”, Mr Streible said.
Bullion has risen more than 20 per cent in 2024, with its recent leg up largely boosted by growing expectations that the Fed will embark on a rate-cutting cycle soon. Strong central bank buying and robust demand in the over-the-counter market have also helped the precious metal’s rally.
Spot gold was down 0.4 per cent to US$2,505.71 an ounce as at the morning of Sept 12 in New York, after peaking at a record US$2,531.75 in August. The Bloomberg Dollar Spot Index was little changed following three sessions of gains. Silver and palladium rose, while platinum edged lower. BLOOMBERG
