Gold Rises on Soft US PCE Inflation Data

Gold climbed toward $4,200 an ounce on Thursday, recovering losses from the previous session as softer-than-expected US PCE inflation data reduced expectations for a Federal Reserve interest rate hike this month. The US PCE price index rose 0.3% in August, below the 0.4% forecast, while core PCE increased 0.2%, also coming in below expectations for a 0.3% gain. Markets now see roughly a 38% chance of a Federal Reserve rate hike in October, down from 51% before the PCE release. Oil prices also eased amid signs of improving energy flows from the Middle East, despite continued deadlock in US-Iran negotiations. Meanwhile, Treasury yields remained near multi-decade highs amid concerns over persistent energy-driven inflation, which could lead to tighter monetary policy. Traders continue to price in around a 97% probability of a Fed rate increase in December.

Gold slipped toward $4,150 an ounce on Thursday after surrendering intraday gains in the previous session, as elevated oil prices and Treasury yields outweighed support from softer-than-expected US inflation data. The US PCE price index rose 0.3% in August, below the 0.4% forecast, while core PCE increased 0.2%, also falling short of expectations for a 0.3% gain. On an annual basis, headline PCE inflation came in at 3.4%, below the expected 3.7%. Markets now see roughly a 38% chance of a Federal Reserve rate hike in October, down from 51% before the PCE release. Meanwhile, oil prices remain elevated as the US and Iran make little progress in negotiations despite signs of recovering Middle East flows. Treasury yields also climbed to multi-decade highs amid concerns over persistent energy-driven inflation, which could prompt tighter monetary policy.

Gold rose to around $4,200 an ounce Wednesday, as softer-than-expected US inflation data eased expectations of another Federal Reserve rate hike as soon as next month. The PCE price index rose 0.3% in August, below expectations of 0.4%, while core PCE increased 0.2%, also below forecasts of 0.3%. Annually, headline PCE inflation stood at 3.4%, below expectations of 3.7%. Markets are now pricing in a below 40% chance of a 25 bps rate hike in October, down sharply from 70% last Friday. New York Fed President John Williams also said the Fed does not need to rush into another rate increase following this month’s hike, further supporting gold. However, precious metals remained under pressure from elevated Treasury yields, with both 10-year and 30-year US Treasury yields at multi-year highs. Gold fell nearly 6% in September, pressured by persistent energy-driven inflation and hawkish comments from Fed officials that strengthened expectations for further policy tightening later this year.