Gold on track for best month in four as inflation data bolsters rate cut bets

Synopsis

Gold prices surged by approximately 1% on Friday, marking their strongest monthly performance since April. This increase was fueled by U.S. inflation data, reinforcing expectations of a potential Federal Reserve interest rate cut next month. Spot gold reached $3,443.19 per ounce, while silver and platinum also saw gains.

Gold prices rose around 1% on Friday and were poised for their best monthly performance since April, as U.S. inflation data reinforced expectations that the Federal Reserve could cut interest rates next month.

Spot gold was up 0.8% at $3,443.19 per ounce, as of 1:53 p.m. ET (1753 GMT), its highest level since July 17. Bullion has gained 4.7% in August.

U.S. gold futures for December delivery settled 1.2% higher at $3,516.1.

The dollar held steady, but was set for a monthly drop of 2.2%. A lower dollar makes gold less expensive for overseas buyers.

U.S. consumer spending increased solidly in July while underlying inflation picked up as tariffs on imports raised prices of some goods. The U.S. Personal Consumption Expenditures Price index rose 0.2% month-on-month, and was up 2.6% on a year-on-year basis, both in line with expectations.

"We have expectations of a Fed rate cut, or potentially two, throughout this year, (which is) generally supportive for commodity prices across the board, including gold and silver," said David Meger, director of metals trading at High Ridge Futures.

Traders increased their bets on a 25-basis-point rate cut by the U.S. central bank at the September policy meeting to a near 89% probability, up from 85% before the data.

Non-yielding gold typically performs well in a low-interest-rate environment.

Meanwhile, a federal judge on Friday will consider whether to block President Donald Trump temporarily from firing Federal Reserve Governor Lisa Cook while she pursues a lawsuit claiming Trump has no valid reason to remove her.

"Gold is benefiting from this uncertainty (around Fed independence), as shown by inflows into gold ETFs of just under 15 tons in the last two days. Nevertheless, the upside for gold above $3,400 is looking increasingly limited," Commerzbank said in a note.

Spot silver gained 1.7% to $39.77 per ounce, platinum added 0.3% to $1,362.86, and both metals were on track for monthly gains. Palladium was flat at $1,102.08, heading for a monthly loss.

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