Gold Price Forecast: expected to rise for second consecutive month; approaching record levels before inflation report

Comex Gold futures slipped by 0.25% to $2,553.80 per troy ounce on Friday, remaining near the record high of $2,570.40 set on August 20, as per media reports. The precious metal’s ascent has been fueled by growing optimism about interest-rate cuts by the US Federal Reserve, following dovish remarks from Chair Jerome Powell at the August Jackson Hole Economic Symposium.

Yet, as traders awaited important US inflation data for more direction, Gold was on course for a second consecutive monthly gain due to growing expectations on a Federal Reserve rate cut next month.

Additional Insight: The uncertainty surrounding geopolitical tensions and economic indicators, combined with the signals of a potential Federal Reserve rate cut, have solidified gold’s position as a safe-haven asset in the current market climate.

Analysts claim that investors are keeping a close eye on US inflation data to get a sense of how big the rate cut would be. As economic uncertainties persist, including geopolitical tensions highlighted by the Israeli military action in the West Bank, gold continues to be a preferred safe-haven investment. The attraction of gold has increased due to recent data indicating a decrease in US unemployment claims and Fed Chair Jerome Powell’s indications of impending rate cut.

“Attention now turns to the PCE price index, the Fed’s preferred inflation gauge, for further market direction. Gold is likely to remain supported as investors await key US inflation data, with expectations of a Federal Reserve rate cut boosting its safe-haven appeal,” said Prathamesh Mallya, DVP- Research, Non-Agri Commodities and Currencies, Angel One Ltd.

On the domestic front on Friday, October delivery gold contracts on the Multi Commodity Exchange saw a trading volume of 16,538 lots, witnessing a decrease of ₹157 to ₹72,031 per 10 kilos, as per news reports. Analysts attributed the drop in gold prices to unfavorable global signals.

Additional Insight: Global signals play a significant role in influencing gold prices, reflecting the interconnected nature of the commodities market and the impact of international events on precious metal values.

Gold Outlook

Traders have already factored in a potential rate decrease in the US next month, with a 66% likelihood of a 25 basis point drop and a 34% probability of a 50 basis point fall, as stated by Mohammed Imran, Research Analyst at Sharekhan by BNP Paribas. Gold is experiencing a positive trend, attributed to lower rates and geopolitical uncertainties.

“Although the size of a potential September Fed cut could well be influenced by how tame or otherwise the core PCE Price Index come in for July, Consensus for core PCE stands unchanged at 0.2% MoM but slightly higher on YoY basis at 2.7% from 2.6% in June. However, with the Fed having hinted rate cuts clearly, a print close to 0.4% MoM may be needed in the core measure to derail that. The PCE is also unlikely to prompt the market to price in a larger rate cut for September in case of softening, so bigger focus remains on labour market indicators,” said Imran.

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decision.

Additional Insight: The correlation between inflation data, Federal Reserve rate decisions, and market responses underscores the intricate interplay of economic indicators in shaping the trajectory of gold prices. Investors should continue to monitor these factors closely to make informed investment decisions.