Gold hits 4-month high as US rate cut expectations rise
What's the story
Gold prices have surged to a four-month high, driven by rising expectations of an interest rate cut by the US Federal Reserve. The spot gold price rose 0.3% to $3,457.16 per ounce, its highest since April 23. Meanwhile, US gold futures for December delivery also witnessed a similar increase of 0.3%, reaching $3,525.70 per ounce.
Economic indicators
US consumer spending increased in July
In July, US consumer spending saw a solid increase while underlying inflation also picked up. This was attributed to tariffs on imports that raised prices of some goods. However, this data is not expected to stop the Fed from cutting interest rates later this month. On Friday, it was reported that the US Personal Consumption Expenditures Price index rose 0.2% month-on-month and 2.6% year-on-year, both in line with expectations.
Market expectations
Traders see high chances of Fed easing rates
Traders are now pricing in an 87% chance that the Fed will ease rates by 25 basis points later this month. This is because non-yielding gold usually does well in a low-interest-rate environment. On the trade front, US Trade Representative Jamieson Greer said on Sunday that talks with trading partners are continuing despite a court ruling declaring most of President Donald Trump's tariffs illegal.