Gold Prices Near Record Highs as Markets Await U.S. Inflation Data – PCE Data in Focus

Gold prices fell slightly in Asian trade on Friday, but remained close to record highs as markets awaited more cues on interest rates from key U.S. inflation data due later in the day. Spot gold fell 0.3% to $2,514.55 an ounce, while gold futures expiring in December fell 0.5% to $2,547.80 an ounce by 01:08 ET (05:08 GMT).

Despite the slight dip, bullion prices were set for strong gains in August, with spot prices set to gain about 2.8% for the month after hitting a record high of $2,531.72 an ounce earlier in August. The surge in gold prices was driven by a mix of safe haven demand and expectations of interest rate cuts, which put the yellow metal at record highs.

Tensions in the Middle East and a rout in risk-driven markets at the beginning of the month spurred safe haven demand for gold. Additionally, signs of steady central bank buying in emerging markets supported prices. However, the biggest support for gold came from expectations of lower U.S. interest rates, which create a more accommodative environment for investing in the precious metal.

The focus now shifts to the Personal Consumption Expenditures (PCE) price index data, the Federal Reserve’s preferred inflation gauge, which is set to offer more cues on interest rates. The PCE data is expected to show that inflation remained sticky in July, which, coupled with recent signs of resilience in the U.S. economy, could give the Fed less impetus to cut interest rates sharply. Traders are still pricing in at least a 25 basis point cut in September, according to CME Fedwatch.

In contrast to gold, platinum and silver were mixed on Friday and lagged behind gold significantly throughout August.

Turning to industrial metals, copper prices advanced on Friday after reports of more stimulus measures in China, the top copper importer, boosted sentiment. Benchmark copper futures on the London Metal Exchange rose 0.5% to $9,324.50 a ton, while one-month copper futures rose 0.8% to $4.2447 a pound. Beijing was reportedly considering refinancing around $5.4 trillion worth of mortgages, a move that is likely to provide a boost to China’s property market. The property market is a major source of Chinese copper demand, and a slowdown in the sector had raised concerns about slowing Chinese demand for the red metal.

Overall, gold prices remained near record highs, supported by safe haven demand, central bank buying, and expectations of lower U.S. interest rates. The focus now shifts to the PCE data for further insights into the future direction of interest rates. Meanwhile, copper prices advanced on hopes of stimulus measures in China, which could support demand for the industrial metal.