As US data indicated a slowing of the economy, expectations of a Federal Reserve interest rate cut next week helped drive gold prices up more than 1% to a record high on Thursday.
As of 9:46 a.m. ET (1346 GMT), spot gold was up 1.6% at $2,551.19 per ounce, while US gold futures were up 1.4% at $2,578.90. According to the US Labour Department, initial claims for state unemployment benefits increased by 2,000 to a seasonally adjusted 230,000.
In August, US producer prices rose marginally more than anticipated due to rising service costs; however, the overall trend was consistent with declining inflation.
Gold is getting much more appealing because interest rates are going to drop. According to Alex Ebkarian, chief operating officer of Allegiance Gold, “I think we could potentially have a lot more frequent cuts as opposed to a bigger magnitude.”
According to the CME FedWatch tool, markets are currently pricing in an 87% chance of a 25 basis point US rate cut at the Fed’s meeting on September 17–18, and a 13% chance of a 50 basis point cut.
According to Phillip Streible, chief market strategist at Blue Line Futures, “the labour market is still struggling, and if it gets worse, the journey they’ll be taking to cut rates will take a long time.
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